Credit downgrade a signal to get tougher on spending
Alberta taxpayers were dealt another blow when Moody’s downgraded the province’s credit rating.
Credit downgrades matter for taxpayers because they can increase the interest charges that Albertans need to fork over when politicians borrow money. Alberta taxpayers are already expected to pay an arm and a leg to service the government’s debt, so, a credit downgrade makes a bad situation worse.
In 2022, the Alberta government’s interest charges will cost taxpayers more than $3 billion, according to the government’s budget released before Moody’s credit downgrade. That’s about $650 per-person. And instead of being used for something useful such as helping to buy school textbooks or build a hospital, it’s going straight into the pockets of bond fund managers on Bay Street.
Alberta Finance Minister Travis Toews blamed “previous governments’ fiscal mismanagement” and the “inability to gain market access” for the credit downgrade. Those points are certainly a factor.
Moody’s specifically cited “a lack of sufficient pipeline capacity” as a big part of the problem. The feds rejected the Northern Gateway project, moved the regulatory goalposts on Energy East and passed legislation that will make it harder to get pipelines built.
The pipeline deficit has already cost Alberta billions of dollars. And if things don’t improve and big pipeline projects aren’t completed, the Alberta government is expected to lose out on another $5 billion by 2023.
Past Alberta governments also deserve blame.
The Progressive Conservatives doubled program spending between 2004 and 2015. Even during the boom years they somehow managed to run six deficits in 10 years. Then when taxpayers needed relief the most, the New Democrats hiked spending by more than 16 per cent and added nearly $50 billion to the debt tab.
But Toews shouldn’t be left off the hook; he’s not doing enough to patch together the government’s leaking financial ship. After more than a decade of frivolous government expenses, his recent budget couldn’t even put a dent in total spending.
Total government spending will be higher under Toews and the United Conservatives than it was under former finance minister Joe Ceci and the NDP government. Toews will be adding more than $30 billion to the NDP debt tab.
Fortunately for Toews, Moody’s provided the government with a common-sense way to improve the province’s credit rating: balance the budget quicker and stop racking-up debt charges.
Even better, Moody’s highlighted an essential area for spending cuts: “[Alberta’s] very high per capita health-care spending.”
Toews may have hoped to maintain the overall health-care budget while he was campaigning, but that was before he found out that Alberta taxpayers spend way more than other provinces, but don’t receive the best results.
The expert Blue Ribbon Panel on Alberta’s finances found that the Alberta government would spend $3.6 billion less if it brought its per-person spending in line with similar provinces. And despite Albertans spending way more than people living in Ontario, our wait times, from referral from general practitioner to treatment, are 10 weeks longer.
After years of spending hikes, an expert panel that concluded “Alberta has a spending problem” and another credit downgrade, all areas of the government budget should be seeing serious spending cuts.
Toews has a lot of work to do to pull the government out of this financial hole. When politicians and special interest groups come to him asking for a taxpayer-funded treat, he needs to be simple and clear: we can’t afford it.
If Toews is truly “disappointed” by the recent credit downgrade, then he needs to take the scissors out and get serious about Alberta’s spending problem.
This column was originally published in the Calgary Sun on December 7, 2019.