Alberta Budget 2019: Cuts to post-secondary, public sector amid job promises
Published Thursday, October 24, 2019 5:53AM MDT Last Updated Thursday, October 24, 2019 6:40PM MDT
EDMONTON -- The UCP government's new budget is promising to restore jobs to Alberta while also delivering the planned "surgical cuts" with the public sector and post-secondary students and institutions among the hardest hit.
The new budget takes what it describes as a "measured approach to address overspending" while focusing on three themes: getting Albertans back to work, making life better for Albertans and standing up for Alberta.
"It’s a good day for Alberta," said Alberta Finance Minister Travis Toews, adding the government plans to balance the provincial books in the next four years.
"It's a budget that really reflects the mandate that Albertans gave us last spring."
- Read the full 2019 budget on the government's website
- Winners and losers of the 2019 Alberta budget
- How does Alberta Budget 2019 affect Edmonton?
- What critics are saying about the Alberta government's budget
Budget documents indicate the province plans a 2.8 per cent spending reduction over four years, while noting the province's debt has reached $62.7 billion for taxpayers.
The government says it's aiming to turn those numbers around with a combination of cuts, restrained spending, red tape reduction and a projected $7.5 billion increase in revenue by the end of 2022-23 spurred by improved access to oil markets—primarily the Trans Mountain Pipeline expansion.
Toews said the provincial deficit sits at $8.7 billion, but that the budget puts the province on track for an $800 million surplus by 2023.
"This budget reflects our commitment to living within our means, ending a nine-year run of government overspending and balancing the budget by 2023," said Toews.
"We don't need both of those pipelines. We do need one," he said of the Trans Mountain and Keystone XL pipelines.
Opposition NDP Leader Rachel Notley was quick to criticize the government's fiscal plan, saying it would make Albertans pay more and get less.
"We knew we were going to see cuts, what he didn’t tell us was that every single Albertan was going to pay more for income tax," Notley said. "What he didn’t tell us was that you’ll pay more for the services that you count on."
MacEwan University political scientist Chaldeans Mensah said this year's budget is a cautious one.
"There’s a bit of restraint in this budget, but it’s not the brutal cuts we saw under Ralph Klein," he said, referring to the former premier's massive cuts in the '90s. "This is a modest austerity, not a big cutback."
He said if the government plans to hit its surplus target by 2023, it must take "serious steps" to reduce spending even more than it already has.
CORPORATE TAX CUT
A key part of the budget's job creation plan is a cut in the corporate tax rate that makes Alberta's the lowest in Canada.
The province's job creation tax cut will reduce the corporate income tax rate one per cent each year, from 12 per cent to eight per cent, through 2022.
"Workers ultimately bear the cost of high corporate income taxes, with corporate tax increases passed on through lower wages and higher cost products," the province's fiscal summary reads.
The province says the cut will increase investment by approximately $4 billion per year by 2023.
It's also implementing a new capital cost allowance that provides up to $900 million in tax deferrals over four years for companies that make new investments in Alberta.
"The corporate tax cut is a very dicey political issue," said Mensah. "The opposition party doesn't see it as positive at all, so there's a left-right aspect to it. I think this is consistent with the ideological bent of this government."
Notley's summation of the tax cuts was stern.
"This is basically a plan to make everyday Albertans pay for this government’s four and a half billion dollar, no job handout to big corporations and the super rich. A handout that has so far done nothing but user in 27,000 jobs losses," she said.
PUBLIC SECTOR CUTS
Among the bigger budget cuts is a 7.7 per cent reduction of Alberta's public sector over the next four years, amounting to "targeted reductions" resulting in a loss of 1,588 jobs, mainly through attrition, and including justice, social services and post-secondary workers.
The province is also looking to correct "compensation outliers" for physicians, nurses and teachers.
It estimates a compensation reduction of 2.1 per cent across the public sector will save $552 million through 2022-23.
"Albertans can no longer afford to support a public sector that is so much more expensive than other provinces."
EDUCATION AND POST-SECONDARY STRESS
Education and post-secondary were expected to take a hit after recommendations from the MacKinnon Panel—put together by the UCP to analyze the province's finances—to tighten spending.
"Implementing it will require difficult choices and bold action," Janice MacKinnon, a former Saskatchewan finance minister, said when the report was released.
That bold action was led with cuts in post-secondary education, decreasing its budget from $5.4 billion to $5.1 billion for 2019-20, and a further six per cent down to $4.8 billion in 2022-23.
Kindergarten to Grade 12 spending will remain at $8.2 billion until 2022-23. The MacKinnon panel recommended revising education funding to address bigger class sizes and incentivize sharing services.
"Education's current model is not sustainable," the fiscal plan reads.
The government is developing the K-12 Assurance and Funding Framework for the 2020-21 school year, which plans to increase the share of funding for classrooms and contain cost growth.
The province will also invest $1.8 billion in the 2019 capital plan towards school infrastructure, including $123 million for approximately 250 new modular portable classrooms and $397 million over five years for 25 new schools and upgrade projects.
After spending on health care increased by an average of five per cent over the past decade, the province is this year increasing spending by one per cent, an increase of $201 million on a $20.6 billion operating budget.
"The ministry must be more innovative and efficient with the billions of dollars spent on health every year and to offset cost pressures from growing demand for services, and growing cost of services."
Among the programs funded include mental health and addiction ($100 million), opioid response strategy ($40 million) and palliative care ($20 million).
The province says "a detailed plan" to address surgical wait times will be ready for next year's budget.
Municipalities will receive 32 per cent of the capital plan's $24.2 billion over four years.
However, the UCP says Alberta's capital grants are 20 per cent higher than Canada's average, so the government is reducing the Municipal Sustainability Initiative (MSI) in 2020-21 and 2021-22 by $94 million and $142 million, respectively.
A new framework will replace MSI, as well as Edmonton and Calgary's $500-million City Charters Fiscal Framework Act, with $860 million in 2022-23: $455 million for Edmonton and Calgary and $405 million for other municipalities.
The province also said it will maintain its $3 billion commitment for the Edmonton and Calgary LRT projects, but that money won't come until after 2022-23.
In a statement, Edmonton Mayor Don Iveson said the province was "effectively ripping up the City Charter fiscal deal," a long-term revenue sharing arrangement with the city.
"I had an expectation that because it was in the platform it was secure," Iveson said. "I'm very disappointed today to find out that without any warning whatsoever that has changed."
He said Edmonton residents face "falling behind" on infrastructure or paying more in municipal debt interest payments or both.
However, Iveson did praise the government's decision to extend a low-income transit pass and family and community support programs.