Budget 2019 should have gone further to extinguish Alberta’s fiscal flame
Jason Kenney’s first budget as Alberta’s premier is a step in the right direction for taxpayers, but it doesn’t go far enough to the douse the fiscal dumpster fire lit by past premiers.
Political overspending is now burning through more than $2 billion in taxpayer cash just to pay the interest charges on the government’s debt every year. Past premiers have tried to put out the fiscal fire with a gas can. Kenney is using a water gun to put out the fire, so that’s an improvement, but he should be driving a fire truck onto the legislature grounds.
Kenney’s budget will be cutting day-to-day spending and will be making some necessary reductions to departments that have become wildly inefficient, such as Advanced Education. Alberta spends about $10,000 more per university and college student than the average in comparable provinces.
Kenney is also trimming government labour costs. While many Albertans have taken it on the chin, the Alberta government added more than 10,000 employees and increased government compensation costs by more than $3 billion since 2014. And between 2000 and 2010, the government’s wage tab increased by 119 per cent, almost double the rate of growth in the rest of Canada.
Kenney’s first budget is a better fiscal plan than Alberta taxpayers have seen in a long time. But let’s remember that producing a better budget than the New Democrats and the late Progressive Conservatives is like being the most sober person in the drunk tank – it’s nothing to brag to mom about.
The PCs doubled program spending between 2004 and 2015, then the NDP racked up the credit card bill during their four years. Financial experts commissioned by the United Conservative government found that Alberta taxpayers are being overcharged by $10 billion every year compared to peer provinces.
All this, and Kenney still didn’t put a lid on total spending. Total spending is expected to climb from $56.3 billion last year to $58.7 billion this year. By the end of Kenney’s fourth year, his spending will be higher than the NDP’s.
The best time to put out a fire is before it spreads. But Kenney is adding over $30 billion to the total provincial debt bill. Interest charges will grow from less than $2 billion last year to more than $3 billion by the end of 2022. That means each Albertan will lose about $650 in 2022 to pay bond fund managers on Bay Street for interest charges on the Alberta government’s debt.
To add insult to injury, Kenney will be digging further into taxpayers’ pockets even after promising he wouldn’t raise taxes.
“It will be a credible path to bring our finances back to balance without raising taxes,” said Kenney leading up to his first budget.
But he did raise taxes by ceasing to index tax brackets to inflation. As a result, simple cost-of-living adjustments will push families into higher tax brackets. It’s called bracket creep and the premier knows it hurts taxpayers.
“[Inflation] pushes middle-income earners into higher and higher tax brackets, as their real incomes remain the same,” explained Kenney in 1997. “For low and middle income families, bracket creep can suck enough money from the family budget to cause serious financial hardship.”
This hidden tax grab is estimated to cost taxpayers hundreds of millions of dollars. If Kenney was looking for a way to beef up the provincial treasury, then he should have cancelled the $950 million in corporate welfare for petrochemical firms instead of reaching into taxpayers’ pockets with bracket creep and hoping we wouldn’t notice.
By reducing day-to-day government spending, Kenney’s first budget is a much needed course correction from the days where politicians treated taxpayers as the never-ending cash cow. Kenney understands that taxpayers are tapped out. Now he needs to start reducing total spending and begin putting out Alberta’s debt fire.
This column was originally published in the Calgary Sun on November 1, 2019.