Alberta might be sweltering through a brutally hot and blindingly sunny week but there’s a cloud hanging over the provincial government that keeps raining on Premier Jason Kenney’s parade.
We got a good look at the ominous spectre Wednesday morning when Finance Minister Travis Toews released the province’s final fiscal report on the 2020-21 budget.
This was the overly optimistic budget the government unveiled at the end of February last year that predicted solid economic growth, higher employment and a balanced budget by 2023. It was unrealistic even by pre-pandemic standards.
This was the budget that forecast a $7-billion deficit and $88-billion accumulated debt – but also predicted rosy economic growth in 2020 that would help the government to wipe out the annual deficit in a few years and start to pay down the debt.
Well, according to the final accounting, that deficit turned out to be almost $17 billion and the debt hit $93 billion. Plans to balance the budget were tossed out the window.
The 2020-21 fiscal year will go down as the worst in Alberta history, so far.
Of course, the pandemic was responsible for shredding the Alberta economy, at one point helping drive oil prices into negative territory and forcing the government to spend $5-billion on various pandemic safety nets for individuals and businesses.
However, the government added to the fiscal wreckage by reducing revenue thanks to fast tracking a multi-billion corporate tax cut and increasing spending by losing $1.3 billion on the Keystone XL pipeline gamble.
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The government would dearly love to put 2020 behind it or at least manipulate the miserable numbers to its advantage.
And that process started Wednesday with a fiscal sleight of hand by Toews.
Instead of comparing the final 2020-21 budget numbers to last year’s original budget numbers — as is the normal measurement — Toews is comparing the final numbers to those in a third-quarter budget update last November.
Those November numbers projected a $20-billion deficit and almost $100 billion in debt.
But by slyly using those dismal figures as his baseline, Toews can say the budget actually ended up better than expected.
Here’s how it works.
The original budget deficit of $7-billion, for example, ended up being $17 billion, an increase of $10 billion.
However, by using that $20-billion deficit number forecast in November’s update as his baseline, Toews can say the final $17-billion deficit number is actually good news because it’s a $3-billion drop.
That allowed the government to issue a news release Wednesday touting a “smaller deficit” than forecast.
The numbers are undergoing such deep manipulation under Toews, the final 2020-21 budget document should have been issued with massage oil.
Predictably, Toews also tried to blur the past by focusing on a more rosy future bolstered by a steep rise in oil prices and by strong economic growth anticipated to lead the country.
“Last year was very difficult for many Albertans, but the province is emerging stronger than expected,” said Toews.
But it’s all relative.
This year’s budget numbers are as troubling in some ways as last year’s. The 2021-22 budget forecast a $20-billion deficit and $110-billion debt. Those numbers will likely drop thanks to a recovering economy but they have created a nightmare for Kenney and the UCP government that promised Albertans a balanced budget in their first term.
Another awkward bit of fiscal reality for Kenney is just how much the federal Liberal government did to help Alberta deal with the pandemic.
Not only did Ottawa deliver $10.5 billion in direct transfers to the Alberta treasury last year, it sent an estimated $23 billion to individual Albertans and businesses via programs such as the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy.
That might be good news for Alberta but it’s not good political news for the Alberta government that is cranking up the anti-Ottawa rhetoric in advance of the provincial referendum this fall against the federal equalization program.
Kenney wants to get Albertans riled up at the federal government instead of being chronically riled up at him.
And perhaps he can deflect attention away from the fact that even with higher oil prices, Alberta’s fiscal picture is so dismal that Albertans are still facing the “fiscal reckoning” that Kenney kept warning them about last year.
The reckoning has apparently been postponed for now. Toews sidestepped questions about it during a news conference on Wednesday.
It’s not something he wants to discuss now, not while he’s trying to paint an optimistic picture of Alberta’s future that isn’t all in red ink.
Interestingly, he did suggest once again the government will be looking at its revenue options in the next few years. Translation: higher taxes.
Not that Toews would dare be that blunt but introducing tax hikes, even going as far as implementing a provincial sales tax, is something the government will have to consider if it truly wants a sustainable budget.
Toews wants to convince Albertans that better days are ahead — and no doubt they are if the pandemic is truly beaten – but the province’s precarious fiscal situation is a cloud that hovers over Alberta today with a “fiscal reckoning” storm cloud awaiting just over the horizon.
News source- CBC