A Fraser Institute report released Tuesday has shed light on Alberta’s financial state, and how the government lost billions in less than a decade.
The report blames the provincial government’s ‘inability to hold government spending to the rate of inflation, plus population growth’ on its loss of billions of dollars since 2005.
“Alberta’s approach to spending in recent years can be compared to a worker who earns a Christmas bonus one year and assumes that money will be there every year,” Report author Mark Milke said in a press release.
In the report, Milke examined the provincial governments past budgets starting in 2005-2006, to last year’s budget.
Milke stated that although governments said they needed to control spending, and plan for fluctuating resource prices, they did not follow through.
A review of actual spending choices made by the government shows program spending has steadily increased well above the rate of inflation and population growth – which has led to growing deficits.
To demonstrate, the report calculated Alberta program spending was $10,526 per person last year – up nearly $1,000 from 2005-2006 program spending, which was at about $9,594 per person.
The report goes on to say if the province had controlled spending increases, connected to the rate of inflation and population growth since 2005, the province would have spent $22.1 billion less than it did.
This year alone, the report said program spending is $3.6 billion higher than it would have been if spending increases had matched actual growth since 2005.
If it had, Milke said the province would have had a surplus budget every year in the last eight years – including during the recession in 2008-2009. Milke stated a number of economists had warned the province about the hazards of crafting budgets based on boom-time numbers.
Milke said the government should consider the following options in order to balance its next budget: provide annual estimates of public sector compensation costs, compared to the private sector relative to provincial spending, try to bring public sector compensation closer to private sector compensation, freeze overall spending growth to make up for past increases and ensure future spending increases match the rate of inflation.
