Alberta’s 2020 Budget: A Blueprint for Hope
The Alberta Government’s 2020 Budget, entitled “A Blueprint for Jobs”, is built on hope. Hope the next five years will be a lot better than the last five. Hope that pipelines get built, and resource development gets back on track. And hope the economy roars back to life in a big way.
Some of the projections underpinning Budget 2020 include:
- Provincial GDP is expected to grow by 2.5% in 2020;
- Unemployment is expected to decrease to 6.7% in 2020, and then to 5.1% by 2023;
- Business investment (excluding the oil and gas sector) is forecast to jump $1.5 billion to almost $32 billion;
- The price of oil will go from an average of $58 (U.S.) in 2020/21 to $63 (U.S.) by 2022/23, and
- Government revenue will expand from $50 billion this year to $58 billion by 2023, thanks largely to increased income tax revenues and higher bitumen royalties.
While these estimates may be more optimistic than some private sector forecasts, there is indeed reason for Albertans to hope. With the TMX pipeline expansion and Line 3 almost a reality, more shipping capacity should help reduce the price discount for Alberta’s oil exports and boost provincial revenues.
It’s true this is the same resource revenue optimism that governments in Alberta have bet on for decades. However, this time one important thing appears to be different – there is a sharp and determined focus on controlling spending.
As Finance Minister Travis Toews said on budget day, “We need to manage what we can manage.” His budget prescribes about a three per cent reduction in spending spread over several years. For context, while prudent it’s clearly a far cry from the 20 per cent reduction by Ralph Klein’s government back in the 1990s.
Although the government is putting the brakes on spending, Budget 2020 says the books won’t balance until 2022/23. As a result, the provincial debt is expected to top $80 billion that year.
The Budget also estimates cutting around 1,400 jobs across the government sector. The public service currently accounts for $26.7 billion (nearly half) of government spending, so Budget 2020 is expected to deliver “a more modern, cost effective and sustainable” public service.
In addition, the Budget makes repeated references to the findings of the MacKinnon Panel on healthcare reform. Their report found Alberta spends significantly more on healthcare per capita than comparable provinces, without achieving better outcomes. In fact, in some areas, the results are worse.
The Alberta Government is pulling as many policy levers as it can in Budget 2020 to get the economy going again. The corporate income tax cuts for “job creators” will continue, with the general rate dropping from the current 10% to 8% by 2022. And red tape reduction remains a top priority. Making Alberta a less difficult and costly place to work, invest, and do business will, at a minimum, reduce some of the obstacles to investing in the province.
Alberta may finally be turning the corner. But there is still a long way to go for the province to climb out of the hole it’s in. In post-budget media interviews, Minister Toews repeatedly warned about the possibility of ongoing economic volatility, hinting that further spending cuts and difficult decisions could be necessary down the road. Here’s hoping Budget 2020 instead sets the foundation for Alberta’s long-awaited resurgence.
Richard Truscott is the Managing Principal in Alberta for Maple Leaf Strategies.Link Copied