Fiscal Update Q1

Finance Minister Travis Toews provided Alberta’s 2020-21 First Quarter Update and Economic Statement documenting the collective impact of the oil price crash, global economic slowdown and COVID-19 on the provincial economy.
The numbers are sobering:

  • Alberta’s 2020-21 deficit is forecast at $24.2 billion – $16.8 billion higher than estimated in Budget 2020
  • Total government revenue is estimated at $38.4 billion – $11.5 billon lower than expected in Budget 2020
  • Total government expense is anticipated to be $62.6 billion
  • Alberta’s net debt stands at $99.6 billion
  • More than 170,000 jobs have been lost and the official unemployment rate stands at 13 percent

The Minister noted the year began with positive signs of economic recovery including increases in oil production, investment, exports and construction sector activity.  Since then “Black Swan” events have reversed the green shoots with Alberta’s economy expected to contract by 8.8 percent in 2020 – the largest decline in Alberta’s modern-day history.

Employment is not expected to recover until after 2021 and provincial GDP won’t surpass 2019 levels until at least 2022. While pointing directly to public health support and relief measures taken by government in response to COVID-19 and investments in Alberta’s Recovery Plan, Minister Toews strongly reaffirmed the UCP’s commitment to its economic strategy and election platform.  Although balancing the budget will be delayed, the Minister made clear there will be no pivoting from the course outlined by his government since the beginning of the UCP’s mandate.

Minister Toews highlighted the reduction in Alberta’s corporate tax rate, red tape reduction and elimination of the carbon tax as key to attracting investment and creating jobs in the province.  He noted the one-time investments undertaken as part of Alberta’s Recovery Plan, particularly new infrastructure projects, further build on this foundation.

The Minister remained adamant on the need to reduce the spending and footprint of government.  He reiterated that Alberta has the highest spending per capita of any Canadian province and said a sound and diversified economy cannot be built by creating jobs paid for by taxpayers.

The UCP government will not introduce new taxes or pursue other new avenues to raise additional revenues.  The Finance Minister reiterated that government must deliver services more efficiently and cannot ask more of everyday Albertans and Alberta businesses.

Reflecting on the triple threat being experienced by Alberta, Minister Toews said the finish line is not yet in sight, that unknown elements may lie ahead and that a significant second round of COVID-19 could further derail economic recovery.  The Minister did not mince words around the sustainability of Alberta’s deficit and debt. Toews said difficult choices will have to be made in the future and government spending will be reduced.

The UCP government will develop a plan for a sustainable fiscal budget aiming to achieve balance beyond their 2022-2023 objective; but it is too early to apply a new date.  Details of further economic stimulus or potential spending cuts were not provided in the legislature or in response to media questions.  An updated three-year fiscal projection will be provided in November and a reset budget will be delivered in February 2021.  For the time being, the plan is very much in development.

The debate which followed the Minister’s statement very much reflected the dialogue of the past year between the UCP government and the NDP opposition. The questions also suggest the scope and scale of the economic and human effects of the global pandemic, worldwide economic shutdown and bottoming out of prices for Alberta’s single largest commodity are not resonating sufficiently in the critiques and policy alternatives put forward by the Official Opposition.

Unlike the cooperation exhibited by politicians of all stripes during the global fiscal crisis of 2008-09 and in other provinces throughout the COVID-19 pandemic, there will be no collective bootstrapping to try to bring Alberta back to a place of opportunity. Even amidst a global pandemic, and the worst economic times for the province since the Great Depression, it is clear, there is no “Team Alberta” inside or outside of the legislature.

Authored by: Jessica Conlin, Natalie Sigalet, Darren Cunningham and Tim Moro