Being that most Albertans are engrossed with the provincial election (ok, maybe 'engrossed' is a bit of an overstatement) it should be no surprise the Alberta government's third quarter financial snapshot was released recently to little fanfare or attention. The recent announcement of yet another large surplus ($4.2-billion) likely didn't even raise an eyebrow, considering we haven't had a deficit budget since 1993-94 in Alberta. If anything, it merely gave most Albertans a tacit assurance that each party's laundry list of election promises could be fulfilled without too much worry.
Unfortunately, this not the case.
What the third quarter update did show is clouds on the fiscal horizon.
For starters, natural gas royalty revenues came in some $813-million lower than expected in the budget and over $200-million lower than just three months earlier. This is worrisome as natural gas royalties are the Alberta government's second largest source of revenue. This is the third straight quarter of lower than expected natural gas royalties and will be a second straight year of lower than expected natural gas royalties.
Fortunately, bitumen and crude oil royalties, as well as personal and corporate income taxes are higher than expected - kicking in an extra $3.8-billion - more than off-setting the loss in natural gas royalties.
Even Albertans with short memories should recall what happened in 2001 when natural gas prices and revenues lagged. The Klein government attempting to stay out of debt reduced spending by $1.3-billion by: eliminating community lottery boards, freezing hiring, cutting 1 percent out of every department, and deferring millions in infrastructure projects.
While Alberta is not yet in a position of having to make cuts, they may not be too far off; especially considering the reliance the Alberta government places on using non-renewable resource revenues to fund increased spending.
Total revenues in 2007-08 are slated to be $37.98-billion. Higher than expected, but lower than the $38.02-billion collected last year.
Still, the Alberta government receives the most revenue per capita in Canada. In fact, the BC government is only projected to collect 1.3 percent more revenue next year than Alberta is slated to collect this year. Yet, BC has 26 percent more citizens to provide services for than Alberta does.
What this means is that 'out-of-control' spending in Alberta is catching up to our 'we-have-no-control-over' revenues.
Our stagnating, but high revenues would be fine if spending was similarly stagnating, but Budget 2007 increased spending by 17 percent or $4.8-billion.
Revenues down by $33-million, program spending up by $4,847-million.
But, hey don't worry, we've got a $4.2-billion surplus, right Well, sort of. It may be technically correct according to our current accounting rules, but it's important to keep in mind that the $4.2-billion surplus doesn't include the new $2.2-billion debt the government took over from the teachers nor does it include some $2-billion of capital investment not included as an expense. Add those in and our surplus vanishes into the ether.
Last fall, the Canadian Taxpayers Federation ran the numbers and projected that if nothing changes the Alberta government will run a budget deficit in Budget 2009.
The PC Party, the Alberta Liberals and the Alberta NDP have all made expensive promises during this election. No matter who is victorious, a tight financial position will be awaiting the winner.
This will likely mean one of two things: taxes or debt will have to go up to fulfil the spending promises made during this election, or electoral promises will have to be forgotten to keep a balanced budget.
Throughout the 2008 Alberta Provincial election, the CTF provided regular updates which are listed below. This included our "Spend-o-meter" which provided an update of the spending promises:
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