Alberta Finance Minister Doug Horner delivered Alberta’s fifth consecutive deficit budget today, forecasting a $5.6 billion shortfall in 2013-14 and projecting a return to balanced budgets by next year. Wearing a two-year old pair of shoes, meant to symbolize the need for Alberta to make do with less, Horner tabled a budget reflective of the revenue challenges that his government has been hinting at for months. The so-called “bitumen bubble” has made a massive dent in the amount of resource revenues collected by the province – $5.4 billion less than the government had projected in last year’s budget.

This year, the Redford government has split its budget into three separate and distinct categories: operational expenses, capital spending and savings. The operational budget received no increase, despite a rate of inflation plus population growth of four per cent. Horner also announced that the government plans to borrow $5.2 billion to build infrastructure around the province, including 50 new schools and completing the twinning of Highway 63. In addition, the government plans to have $19.2 billion in its various savings accounts by the end of the fiscal year.

Despite the significant decline in revenues, and the resulting budget deficit, Premier Alison Redford has been adamant that she will not raise taxes as a way to fill in the gap and Budget 2013 reflects this commitment. Opposition parties have been warning Albertans for weeks that the Tory government planned to increase taxes, pointing out that this would be another broken election promise. With Budget 2013 standing firm on Redford’s promise to leave tax revenues alone, the Wildrose opposition will no doubt continue to press Redford for a commitment to not increase taxes before the next election, a promise she has not yet been willing to make.

The government also introduced Bill 12, the Fiscal Management Act, which creates the requirement for an operational plan, a savings plan and a capital plan. The Act requires a balanced operational budget and retains a one per cent legislated limit on in-year spending increases in total operating expense. The Act will also set limits on borrowing. Annual capital debt-servicing costs will be limited to a maximum of three per cent of operational revenue, using the most recent three-year moving average.

The savings plan will require that non-renewable resource revenue (NRRR) be saved according to the following rules:

  • 5 per cent of the first $10 billion in NRRR;
  • 25 per cent of the next $5 billion of NRRR (up to $15 billion); and
  • 50 per cent of all NRRR in excess of $15 billion.

A new short-term savings Contingency Account will be created for offsetting operational deficits.

  • Year-end surpluses and/or NRRR legislated savings will go into the Contingency Account until it reaches $5 billion.
  • Once the Contingency Account reaches $5 billion for the first time, any additional NRRR will be deposited into the Alberta Heritage Savings Trust Fund or a provincial endowment.
  • If the Contingency Account later drops below $5 billion, it will be replenished through year-end operational surpluses, while specific amounts of NRRR will be deposited into long-term savings accounts.

In 2015-16, 30 per cent of net income or the amount required for inflation-proofing, whichever is greater, will be retained in the Alberta Heritage Savings Trust Fund.

Notable cuts this year include:

  • A 7.35 per cent reduction in funding for post-secondary institutions
  • Municipal funding cut to $900 million from $1.05 billion.
  • Seniors living less than 10 years in Canada will lose low-income seniors benefit.
  • Seniors Property Tax Assistance program to be income tested in 2013 and scrapped at end of 2014.
  • Six courtrooms will be closed.
  • Alberta Farm Fuel Allowance will be eliminated.

BUDGET HIGHLIGHTS

Health

  • $17.1 billion in total spending for 2013-14, an increase of almost $500 million or three per cent.
  • $3.4 billion for physician compensation and development programs for physicians’ payments as well as programs that support the addition of more physicians to the system.
  • $1.1 billion for drugs and supplemental health benefits for Albertans such as assistance for prescription drugs, ambulance services, cancer therapy drugs and specialized high cost drugs.
  • $358 million for the Alberta Seniors Benefit program.
  • Alberta Health Services (AHS) will receive $10.5 billion in base operating funding for front-line health services, a $307 million or three per cent increase, plus $393 million for operating costs of new   health facilities.
  • $262 million has been allocated for Primary Care Networks, Family Care Clinics, and addiction and mental health services.
  • To ensure comprehensive drug and supplementary health benefit coverage for all Albertans, a PharmaCare program will be implemented on January 1, 2014.
  • Premier Redford is delivering on her campaign promise to fund insulin pumps for Albertans with Type I diabetes. The program will begin this spring.
  • Albertans will benefit from lower generic drug prices, as a result of reduced generic drug prices from 35 per cent to 18 per cent of brand name prices.

Human Services

  • $4.3 billion in total spending for 2013-14.
  • AISH benefits are maintained, with a 4.4-per-cent increase in program funding to address caseload growth.
  • The Persons with Developmental Disabilities (PDD) program will receive a $5.5-million increase as part of a transition to a new service delivery system. Work will continue with families and community partners on a funding model based on assessed needs that achieves positive outcomes.
  • Child Intervention will see an increase of nearly $16 million, including a $7 million increase for foster care support that will fund more than 5,400 foster child placements.
  • Child care subsidies for lower-income families will be maintained with a $6.7 million increase, as will family support for children with disabilities with a $6 million increase reflecting caseload growth.
  • Funding for homelessness support is $111 million, an increase of $1.2 million, which will help house about 1,800 homeless Albertans this year, and fund more than 3,200 spaces in emergency and transition shelters.
  • Initiatives for early intervention and fetal alcohol spectrum disorder will receive $89 million.

Energy

The Ministry of Energy provided specific areas where government will focus its attention over the next three years in its 2013 – 2016 business plan. The full plan can be found here.

  • Explore opportunities to develop and expand Alberta’s access to key global markets;
  • Establish an integrated single regulator with responsibility for conventional oil, gas, oil sands and coal;
  • Development of cleaner energy technologies, including microgeneration;
  • Coordinate the development of a Canadian Energy Strategy with other provinces.

Infrastructure

  • The 2013-16 Capital Plan supports $15 billion in infrastructure projects, with $5.2 billion in each of the next two years and $4.7 billion in 2015-16.
  • $503 million over the next three years for 50 new schools and 70 modernizations, with an expected total cost of more than $2 billion;
  • $282 million over the next three years for new post-secondary facilities at the Northern Alberta Institute of Technology, NorQuest College, University of Calgary, Lethbridge College and Mount Royal University, with an expected total cost of more than $650 million; and
  • $442 million to twin sections of Highway 63 from south of House River to south of Fort McMurray over the next three years.
  • Other major features of the plan include $2.5 billion over three years for the Municipal Sustainability Initiative and $2.1 billion for health care facilities, including hospitals, family care clinics, cancer centres, supportive living and long term care.

OPPOSITION REACTION

Wildrose
The Official Opposition Wildrose is calling this Alberta’s “back in debt budget.” The party is calling the Redford government to task over what it characterizes as the squandering of Alberta’s wealth. They feel that further reductions in spending and an extension of the capital plan over a longer period of time would be a better approach to the province’s finances. To read the Wildrose’s full Budget 2013-14 press release, click here.

Alberta Liberal Party
The Alberta Liberals are furious over cuts to post-secondary education funding and services for seniors and Alberta’s most vulnerable citizens. Leader Raj Sherman has called for the introduction of a progressive income tax structure which would see wealthy Albertans pay more in taxes. He argues this would help to solve Alberta’s revenue shortfall without having to cut essential services. To read the Alberta Liberals’ full Budget 2013-14 press release, click here.

Alberta NDP
The Alberta NDP’s criticisms of the Redford government’s budget echo those of the Alberta Liberals’, calling it an attack on Alberta families. NDP leader Brian Mason was also critical of the new structure of the budget, calling it confusing and accusing the Tories of hiding a larger operational deficit with capital borrowing. To read the Alberta NDP’s full Budget 2013-14 press release, click here.