Contingency budget needed
| Posted: Thursday, Jan 31, 2013 11:13 am
The Alberta government is fighting to get its fiscal house in order amidst lower than expected oil revenue, but what Albertans really want are answers.
The provincial government is preparing Albertans for potential cuts in services to address what could be a $6 billion budget shortfall.
Meanwhile, the opposition is in a feeding frenzy with accusations of the Progressive Conservative government ready to increase taxes, introduce a provincial sales tax, drain Alberta’s savings account and so forth.
Although none of those have been put on the table.
Regardless, Albertans do not want excuses from government or rhetoric from the opposition. What they want are clear, concise answers and detailed plans explaining how the government will burst the “bitumen bubble”.
In a televised address on Jan. 24, Premier Alison Redford reassured Albertans the provincial government will take the necessary steps to soften the blow of what looks to be another deficit budget.
It will be Alberta’s sixth consecutive deficit budget which is a substantial difference from what Redford’s government predicted last spring.
During the 2012 budget it was predicted Alberta would have a $900 million surplus this year and a $5 billion surplus in 2014.
However, those budget numbers were based on $100 per barrel oil, not the $50 which is what Alberta is currently receiving on the market.
Redford’s address was not about unveiling the 2013 budget, but Albertans expected more details, therefore, she received
(The pre-taped address was a poor decision as well. One of Redford’s strengths is her passion and speaking ability and she would have had a much greater impact had the address been live.)
However, the opposition parties are not providing detailed alternatives either.
They are pontificating they can balance the budget and still beef up Alberta’s Heritage Fund.
Really? How are they going to do it without making significant cuts in services? Would it come at the cost of vital infrastructure projects?
Cutting infrastructure projects to balance the budget still leaves Alberta in debt — unfinished highways, schools and hospitals.
In the foothills area alone the Town of Okotoks and MD of Foothills are relying on provincial funding to finish the regional field house, Christ the Redeemer Catholic Schools desperately needs funding for a new school and High River is waiting for flood mitigation.
These are high on local priority lists and cutting these projects would be devastating to rural communities.
Every constituency has similar needs, not wants, but needs the provincial government has to address.
In addition, Alberta’s population continues to grow — more than 100,000 people per year — meaning keeping pace with infrastructure is essential.
Three things are clear: first Alberta needs to develop new markets for its bitumen; second it must have a contingency budget in place especially when revenue is based on a volatile commodity; and third it must review its spending priorities.
Alberta can no longer rely on the United States as its main oil and gas customer. The Americans are becoming more self-sufficient in terms of the need to import oil pushing Alberta’s oil prices down.
The pitfalls of relying on one market is a lesson we learned during the mad cow crisis.
Therefore, pipeline expansion to the west coast to access Asian markets and even east to Canada’s own refineries is critical. Additional markets for Alberta’s oil will mean higher prices and increased revenues.
However, those pipelines are years away meaning Alberta needs to find a way to bridge the revenue gap.
As a result, the provincial government needs to put a contingency budget in place. One budget based on its revenue projections, but another “worst case scenario” budget which can be utilized once energy revenues trend downwards.
Finally, the Province needs to establish a strict list of priorities and if a project or program is not on that list, it is delayed or scrapped entirely.
The Province is on the right path saying no to additional funding for a new arena in downtown Edmonton. This also goes for provincial funding for a new arena for the Calgary Flames.
Perhaps Redford’s results based budgeting will address this issue as it is supposed to eliminate programs not meeting the goals set before them.
Regardless, the Province must find ways to live within its means and communicate those ideas with Albertans.