Alberta Debt Clock Stands at $7.8 Billion
The image most people across Canada have of Alberta is locked in a time capsule. It’s summed up by the picture of a gleaming Ralph Klein hoisting the Alberta debt “Paid in Full” sign above his head in 2004.
This image of Alberta has largely endured, even within Alberta somewhat. Alberta was not only debt-free, but as recently as 2009, had $17 billion tucked away for a rainy day in the Sustainability Fund.
Fast-forward to 2014, and Alberta’s sterling financial reputation is in tatters. The $17 billion rainy-day Sustainability Fund is virtually depleted, and the province is on track to finish the fiscal year with an $8.7 billion debt. In fact, Alberta is projected to take on an additional $4 billion in debt, every year. By the time the next election rolls around, Alberta will be a full $17 billion in the hole.
The strangest thing about this stunning downturn is how little people were aware of it. Alberta’s government was living off of the credibility established during the 1990s, but also altered the rules of the game to obscure how much things were actually changing.
It all began innocently enough in the middle of the last decade with an amendment to the Fiscal Responsibility Act to allow for limited public-private partnerships to finance capital, but not record the liabilities as debt. It was harmless at first, and was in fact a responsible thing to do in many cases by sharing risk with the private sector while locking in lower costs. Technically it was still debt, but not worth ringing the alarm bell over, especially when it was only a couple hundred million and the province had multi-billion rainy day fund.
In 2008 – after years of massive spending increases – the province began running a deficit. The Stelmach government leaned heavily on the Sustainability Fund, but in order to minimize the red ink, it began relying more on borrowing to pay for capital spending. By early 2009, the government owed $2.8 billion, but it was not listed as debt, thanks to the innocent accounting changes made in 2003.
When campaigning for the leadership of the PC Party in 2011, Alison Redford calmed the fears of many fiscal conservatives when she stated, “Debt is the trap that has caught so many struggling governments. Debt has proven the death of countless dreams.”
But this rhetoric about the perils of debt took a sharp turn once Redford was safely secured in the premier’s chair. The government repealed the Fiscal Responsibility Act and Government Accountability Act to weaken its reporting requirements.
This was followed up with the 2013 budget that had three different sets of books and left opposition parties, journalists and non-governmental originations burning out their calculators to try and come up with deficit and debt numbers.
The Canadian Taxpayers Federation (CTF) spent the better part of a year consulting with experts and debating internally how to account for the borrowing in a consistent and transparent manner. The answer was found in Ralph Klein’s 1999 Fiscal Responsibility Act, which legally defined the debt so that the government could set a target for paying it off.
Klein’s legal definition of the debt was essentially all borrowing not intended for arm’s length government corporations and it did not include any savings accounts such as the Heritage Fund, and most certainly did not include valuations of physical infrastructure assets as the government is wont to do. Klein considered netting the government’s long-term savings against its debt to be akin to a family netting the kid’s college fund against its credit card bills.
To boil it down plainly, Klein defined Alberta’s debt as ‘the money Alberta taxpayers owe the banks.’
When the CTF crunched the numbers, the results were startling. $8.7 billion will be owed by the end of fiscal year 2013-14, and $17 billion by the end of 2015-16.
And so the CTF launched AlbertaDebtClock.ca. On the clock, the numbers count upwards at over $11 million every day and $129.25 every second. Right now, it stands at $7.8 billion.
Welcome to the New Alberta.
A report detailing the CTF’s calculation of Alberta’s debt can be found at taxpayer.com