It's hard to think of a provincial budget that arrived with as much hype and warning as the one introduced Thursday by Alberta's government.
Premier Jim Prentice had been alerting Albertans for months to the brutal new reality confronting the province as a result of plunging oil prices. The difference between the heady days of $100-a-barrel oil and the $40 or so that the same container of crude was fetching today had blasted a $7-billion hole in the province's revenues.
It was a gap that represented 17 per cent of Alberta's income base, a deficit large enough to send a chill down the spine of the most cold-blooded finance minister. It certainly got the new Premier pondering the province's predicament and how it was perhaps time to rethink how his petro-economy functioned.
Thursday's budget was supposed to be the manifestation of an intense period of introspection, one that ultimately helped craft a brave new fiscal world that looked out over a 10-year horizon. It was also supposed to be a tough, look-in-the-mirror plan, one that finally ended a pattern of fiscal profligacy at the hands of conservative premiers who didn't have the courage to set the province on a course to live within its means.
So, did Mr. Prentice's budget live up to all the fanfare and expectation? I'd say it did. Any time you blow up the existing personal-income-tax system, announce mass job cuts and still pile up huge debt, you've introduced something that will get people's attention. What was readily apparently is just how dire the province's economic situation is.
While not slashing program spending by 9 per cent as promised, the government is instituting cuts that will be felt in every corner of the province, just as the Premier had suggested would be the case. And soon he will be visiting those corners on a campaign bus to defend them.
Overall, spending is off $323-million over last year, a drawdown that will eventually feel like more given Alberta's relentless population growth. Nearly 2,000 positions in schools and hospitals are going be lost. The province's health budget, which has routinely grown at rates up to 7 per cent over the past decade, will actually fall by $159-million. Finance Minister Robin Campbell said that over the next three years, the government will cut spending in the neighbourhood of $4-billion.
And yet the biggest news was on the tax and service fees front. Albertans are now going to feel a pain their counterparts in the rest of the country have known for decades.
The government has decided to dump its 10-per-cent flat income tax in favour of a more progressive regime that targets those with more money. The last time a government in Alberta raised personal income taxes, Don Getty was premier. The sacred cow that has been the Alberta Advantage is no more.
Even though the province will still boast the country's lowest overall tax rate – for now – this budget has shown that it's no longer considered sacrosanct. Alberta is in desperate financial straits and Albertans had better get used to paying more for everything – from gas to liquor to traffic tickets. There is even a new health-care levy, depending on income. In all, the government will raise nearly $1.5-billion over the next year from their tax ventures.
And yet, despite those measures, the government will still post a nearly $5-billion deficit and see debt climb to $31.2-billion in 2018-19. It will raid the province's quickly diminishing contingency fund of $4-billion to help pay down a good chunk of the deficit. In sum: Things are every bit as desperate as the government has been suggesting.
Normally, this wouldn't be the type of budget you'd want to go to the people with. And yet that is precisely what Mr. Prentice intends to do, likely soon. It will not be an easy sell, but at least Albertans won't be able to accuse him of exaggerating the extent of the province's problems.
It is there in black and white. And, I suppose, red too. It seems like it was just a few short months ago that Alberta was the economic envy of the country. On Thursday, the government laid bare how dramatically its fiscal dream has turned into a nightmare.
Gary Mason