The business case for fiscal discipline in the 2017-18 Alberta budget

Posted by: Kaitlyn Mason on March 14, 2017

Alberta’s budget for the 2017-18 fiscal year is set to come out this Thursday, March 16, 2017. At the Chamber, we are urging our provincial policymakers to take a disciplined approach to public spending, and to prioritize policies that encourage business activity.

Every spring provincial budgets make headlines across Canada. And for good reason. A budget is essentially a government’s economic blueprint, outlining revenue forecasts and the programs on which taxpayer money will be spent.  

For example, Alberta’s 2016 budget included expected revenue ($41 billion) and spending ($51 billion), a deficit ($10 billion), its plans to cut public salaries by two per cent, along with plans to implement investor tax credits, small business tax cuts, and a province-wide carbon levy.  

While setting the annual economic strategy, the budget is also extremely important for keeping governments transparent and accountable to the public. 

Alberta’s budget for the 2017-18 fiscal year is set to come out this Thursday, March 16, 2017. At the Chamber, we are urging our provincial policymakers to take a disciplined approach to public spending, and to prioritize policies that encourage business activity.

It’s no secret that the past year was a tough one for the province, however, the Government of Alberta’s fiscal discipline has been lacking for a long time. From 2005-2015 operating expenses in Alberta grew by almost 75 per cent. The over spending on programs, bureaucracy and public sector salaries was bailed out by oil and gas royalty revenues. But with this revenue source dropping $7.6 billion, or 85 per cent since 2014-15, the government can no longer justify unsustainable spending.  

Despite some of the highest levels of operational spending in Canada, Albertans do not see the highest performance results in critical areas of public service delivery, including education and health care. Any plan to reform our fiscal structure needs to begin with measures that will effectively control operational spending and continually seek efficiencies in the delivery of provincial programs and services.  

Research conducted by your Calgary Chamber underscores this point, where close to 40 per cent of Calgary business leaders indicated that they would support significant cuts to public services to address our province's budgetary challenges and to get our spending in line. 

The NDP cannot be blamed for Alberta’s poor fiscal performance over the past decade. However, during the last fiscal year, our provincial government increased program spending by nearly 10 per cent.   

Government spending tends to grow with the economy, inflation and population. However, Alberta’s expenses have grown at a much faster rate. Had Alberta increased spending only to keep up with inflation and population last year, as recommended by the Calgary Chamber, our government would have run a surplus, rather than a $10 billion deficit.  

A balanced budget is important because it sends a signal that Alberta is a safe and stable place to invest, and is a promising place to move a family and start a business.  

Accumulating debt and increasing public spending can be troublesome for two reasons. When a government borrows money, dollars that should be used for necessary services are instead spent on interest payments.  

And, when government spending increases faster than the revenue coming in, increasing taxes are usually the way to fill the gap. This means greater costs for businesses and residents.  

The return of a high price of oil and royalty revenue would go a long way in revitalizing Alberta’s economy. So would a return to fiscal discipline.

Zoe Addington is the Chamber's Director of Policy, Research and Government Relations, and Franco Terrazzano is the Chamber's Economic Policy Analyst.