A look back at the UCP's first budget 4 months later
EDMONTON -- It’s been nearly four months since the United Conservative Party delivered its first budget promising to get Albertans back to work along with a “measured approach to address overspending” and balance the province's books.
"This budget reflects our commitment to living within our means, ending a nine-year run of government overspending and balancing the budget by 2023," Finance Minister Travis Toews said in delivering the budget on Oct. 24, 2019.
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The last budget overhauled a number of public policies, but its headline was a job creation plan spurred by a four-year reduction of the corporate income tax and scaling back overall spending, particularly in the public sector.
That plan is based on a number of assumptions around the timely construction of pipelines, with improved oil market access projected to increase revenue by $7.5 billion over the next three years.
Four months after they were introduced, here’s how the budget's key policies and assumptions have played out so far.
A key part of the UCP’s jobs plan is an annual one per cent reduction in corporate income tax, from 12 per cent to eight per cent through 2022, that it claims will increase investment by approximately $4 billion per year.
Most analysts would agree that four months is too short a window to attract major long-term employers. But, so far the plan hasn’t gotten off to a promising start.
Alberta’s unemployment rate sits at 7.3 per cent: a rise of 0.7 per cent from when the UCP took office in the spring and up 0.5 per cent from the party’s first budget.
Since October, Edmonton has had the fourth, second, first, and second highest monthly unemployment rates of any major Canadian city. Calgary has ranked third, fourth, fifth and sixth in monthly rates over the same time.
The government has also had to beat back criticism amid some ominous signs from the business community.
The CEO of Calgary Economic Development warned that environmental concerns and the vocal Wexit separatist sentiment had led a major technology company to decide against establishing its head office in Alberta.
And in December, the province’s credit rating was downgraded by Moody’s who cited Alberta’s over-reliance on non-renewable resources, calling it “a structural weakness” of the economy.
"We know that Alberta is facing a very difficult economic situation, as it has been for over five years. Turning around the mess left by the previous government and harmful federal policies won’t happen overnight," UCP press secretary Jerrica Goodwin wrote in an email to CTV News last month.
OIL AND PIPELINES
On this front, things have played out more promisingly for the government.
The UCP’s financial forecast assumed the construction of at least two of three pipelines by 2023: Enbridge’s Line 3, the Trans Mountain Expansion and Keystone XL.
And, supporters of the Trans Mountain pipeline won a major legal battle when the Federal Court of Appeal dismissed a challenge to its expansion.
On the downside, the last budget assumed an average oil price of $57 US per barrel, and West Texas Intermediate is currently below that at a bit above $53 per barrel at the end of this week.
Analysts have pointed to the ongoing COVID-19 health crisis as one of several factors keeping prices low.
"There's a lot of fear in the market. And a lot of forced liquidations," said Ryan Fitzmaurice, energy strategist at Rabobank.
Budget 2019 outlined a 7.7 per cent reduction in the public service over the next four years.
“Albertans can no longer afford to support a public sector that is so much more expensive than other provinces," the budget read.
Those plans hit a setback after an independent arbitrator awarded government workers a one per cent raise in wages, a ruling which the government says will cost it $35 million.
The Alberta Union of Provincial Employees says the province has proposed a one per cent wage decrease in the first year and a wage freeze in the following three years, something the union called “an act of revenge, not a rational argument.”
Amid negotiations with unions, Toews said hard choices would have to be made.
“Holding the line on public sector compensation will ensure workers continue to receive competitive wages while showing needed respect to other Albertans who have seen their wages disappear or their jobs lost completely," Toews wrote in a statement.
The union’s contracts expire at the end of March giving the government a relatively short runway to ensure labour peace.
The UCP pledged to sustain health care spending at current levels but also find efficiencies in a system it said had become bloated and in need of reform .
A review of health care delivery that was released on Feb. 2 found that the province could save up to $2 billion a year by changing work and pay rules for nurses and doctors and outsourcing support services to the private sector.
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Nurses and doctors have expressed fear that any changes will undermine the care they provide and some have taken to a number of public rallies amid growing fears of a coming labour battle.
Alberta Health Services has three months to draw up a plan to usher in the review’s 57 recommendations.
“We campaigned on strengthening our publicly funded health system, starting with increasing access and reducing wait times,” a government statement to CTV News reads.
“Every dollar we save will stay in the system to do that.”
This week, the province announced 11 changes to physician rules and fees that will take effect April 1.
The 2019 UCP budget characterized the province's education system as over-funded and inefficient.
"Education's current model is not sustainable," reads the 2019 fiscal plan.
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Post-secondary education saw its budget reduced by $300 million for 2019-20 and down a further six per cent to $4.8 billion in 2022-23.
The province also announced a new performance-based funding structure where universities and colleges will receive provincial funding based on the achievement of predetermined targets, including graduation rates, post-graduation employment and quality of teaching.
Last week, the province unveiled a new education funding model, but is declining to provide numbers on funding until the new budget is tabled.
According to the Alberta Teachers' Association, the last budget resulted in $136 million less for education as enrolment increased by roughly 13,000 students.
Budget 2019 scrapped the City Charters Fiscal Framework, a funding program for Alberta’s two largest cities.
The move came as a surprise to Edmonton Mayor Don Iveson, who on budget day cancelled a trade trip abroad to instead rail against the new policy.
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“I'm very disappointed today to find that, with no warning whatsoever, that has changed,” he said.
The UCP replaced the agreement with a new framework worth $455 million starting in 2022-23.
"The provincial spend component is being pushed out to better reflect our fiscal situation," Finance Minister Toews said.
Rural municipalities, often an area of solid conservative support, want the province to take action on the more than $170 million in unpaid taxes owed to them by oil and gas companies along with the cost of cleaning up scores of abandoned, and environmentally damaging, oil wells.
“You've got to pay your taxes,” said Ponoka County Reeve Paul McLauchlin.
CTV News will have full coverage of Alberta Budget 2020. Visit CTVNewsEdmonton.ca on Thursday, Feb. 27 for news, analysis and video from budget day at the legislature.
With files from CTV Calgary, the Canadian Press, and CNN