A spend and borrow budget with the largest deficit in Alberta’s history
Breanna Karstens-Smith, CTV Edmonton
Published Tuesday, October 27, 2015 3:22PM MDT
Last Updated Tuesday, October 27, 2015 7:15PM MDT
Alberta will run the largest deficit in the province's history.
The government unveiled the 2015 budget on Tuesday, the first under a NDP government.
The budget is a spend and borrow budget that will see the province borrowing for operating for the first time in two decades.
Several taxes will be increased for the second time in eight months while funding is pumped into job creation, education and family supports.
“Overall this budget lays out a responsible economic plan that will serve as a shock absorber for our short term challenges and grow the economy over the long term,” Finance Minister Joe Ceci said.
Opposition parties saw it differently. “It’s a great day, maybe not for Abertans,” said Wildrose Leader Brian Jean calling the budget a “fantasy.”
Draining the bank account
The 2015 budget announced in March under the Prentice government had a surplus of $1.1 billion. The new 2015-16 budget announced eight months later includes a deficit of $6.1 billion.
The deficit is projected to be reduced to $5.4 billion in the 2016-17 fiscal year and $4.4 billion the following year. By 2019-20 the budget is expected to be balanced with the province running a $1.0 billion surplus.
“I think Albertans will continue to be proud that we are building a province that will take us far beyond this recession and lift us back to the good time that we all remember,” said Finance Minister Joe Ceci.
The province’s debt will rise from $12.9 billion this year to more than $36 billion in three years. That would hit $55 billion in five years.
“When you’re borrowing for infrastructure you outta have a plan to pay it back. And they don’t,” Interim Progressive Conservative Leader Ric McIver said.
“The Alberta Advantage was killed by the previous government but buried by this government,” Wildrose Finance Critic Derek Fildebrant told the media.
Revenue saw a steep decline in the province with the total revenue forecast to be $43.8 billion in 2015-16. That was $5.7 billion less than the previous year.
While the deficit is the largest, it isn’t a record. In the 1986-87 budget, the deficit was $4 billion. That was a 6.9 per cent deficit relative to GDP. The 2015-16 budget is a 1.8 per cent deficit relative to GDP.
For the first time since the 1993-94 budget, the province will be borrowing to cover operating expenses. That will begin in 2016.
The Contingency Account will be drained under the NDP government. Prior to the budget, it sat at $6.5 billion. It will be reduced to $3.3 billion in the 2015-16 budget. By 2016-17, there will no longer be any funds in the account.
The Finance Minister said using the account was necessary to ensure the province could hire front-line staff.
“We don’t want to fire thousands of nurses and teachers so we’re going to continue to appropriately fund frontline services,” said Ceci, defending the decision.
The low price of oil continues to be a factor in the fiscal forecast. The price of West Texas Intermediate (WTI) was forecast at $50.00 per barrel in budget 2015-16, lower than the $54.84 per barrel price used in the March budget. The 2016-17 forecast uses an estimate of $61.00 per barrel.
More tax increases
The NDP budget will further raise several tax increases announced under the Prentice government in March.
The budget released in March raised tobacco taxes by five dollars per carton to $45 per carton. That will go up to $50 per carton beginning October 28.
At the same time, liquor mark-ups will go up an additional five per cent after increasing eight months prior. A bottle of liquor will increase by 18 cents on average. A bottle of beer will go up by about two cents.
Planned increases to the cost of marriage licences, motor vehicle fees and land titles were reversed.
Tax on insurance premiums would go up by one percent beginning April 1, 2016 – a new increase not included in the March budget. The tax on life, accident and sickness insurance will go up to three per cent from two per cent. The tax on all other insurances will go up to four per cent from three per cent. The increases are projected to generate an estimated $158 million in revenue during the 2016-17 year.
The tax increases will provide an extra $1.5 billion in revenue in 2015-16 and $2.3 billion per year for the next two fiscal years.
“Increasing alcohol and tobacco taxes won’t cut it,” said AUPE President Guy Smith, stating he would like to see more revenue streams.
Funding for families
Families received funding for child care in the new budget. $75 million will be set aside in 2016-17 and $100 million in the following year to move towards $25 per day child care throughout the province, an initiative announced during the provincial election.
An Alberta Child Benefit introduced under Jim Prentice to help support low income families in the province remained in the budget. Families making less than $41,250 annually will receive an annual benefit of up to $1,100 for one child and up to $550 for each of the next three children. The program will begin in July 2016. Under the NDP government this is a paid benefit. Prentice had planned on offering the perk as a tax credit.
Funding for schools
The budget included funding for an estimated 380 new teachers in Alberta during the 2015-16 school year. Those positions were filled prior to the budget being released with school boards banking on the funding while creating their budgets for the current school year.
In 2016-17, $40 million will be set aside for a new nutrition program in the province. Officials did not have specifics regarding how many schools would benefit from the program or how they would qualify. Details are expected to be released in the coming months.
There will be a freeze on post-secondary tuition and non-instructional fees over two years while the government reviews the overall funding model for Campus Alberta.
Annual funding of $45 million has been committed to reduce school fees across the province.
“We are restoring funding to the education and advanced education budgets that were cut by the former government,” said Minister Ceci, while introducing the budget.
The province introduced a new program in an effort to support more jobs. The Job Creation Incentive Program will give employers grants of up to $5,000 for each new job created each year.
The program will last two years and is expected to support up to 27,000 jobs each year.
31,000 jobs have been lost in the private sector since December of 2014.
Healthcare funding will see less of an increase than it has under previous governments. The operating budget will increase by four per cent in 2016-17 and three per cent in 2017-18 compared to the six per cent increases it had seen in previous years.
There will be a 15 per cent increase in capital spending for infrastructure projects over the next five years. That will include:
- $3.8 billion for schools
- $4.7 billion for roads and bridges
- $2.2 billion for health facilities and equipment
- $4.4 billion for projects yet to be announced
Funding was set aside to plan for renovations or replacements for the Misericordia and Royal Alexandra hospitals. No funding was earmarked for the actual construction.
“It will get the ball rolling,” said Health Minister Sarah Hoffman.
Municipal transit initiatives will receive $330 million. Officials did not have details on what projects that funding would go towards.
$877 million was set aside under the Municipal Sustainability initiative for communities.
There will be a salary freeze for cabinet ministers, MLAs and political staff for the rest of the legislative term.
“I’m confident in the plan we’ve built,” the Finance Minister said.