Province back in the black
Alberta: Provincial government still borrowing billions
Tuesday, Mar 11, 2014 05:18 pm
Alberta is back in the black as the provincial government announced an operational surplus in its 2014 budget last week, but it is borrowing billions to pay for new infrastructure.
The Province is forecasting a $2.6 billion operating surplus and a consolidated surplus of $1.1 billion. The Province is also forecasting surpluses for the next three years. However, it is also borrowing $5.1 billion for capital projects – a move that is drawing criticism and raising concerns about the Province’s ballooning debt.
Alberta’s municipal affairs minister said the government is paving the way for the future building new schools, roads and hospitals, while balancing operating expenses.
“I think that what we’re doing here is we’re setting the runway for the future in Alberta,” said Ken Hughes. “We had to make some difficult decisions last year in last year’s budget and part of that was setting the tone that we wanted to live within our means and have restraint.”
Total provincial revenue is $44.4 billion. Operating expenses are $40.4 billion, which includes a 3.7 per cent increase over last year. The budget includes $1 billion in new funding for health care, education and human services. The Province has also budgeted $6.6 billion for new infrastructure in 2014, and $19.2 billion over the next three years. Alberta’s towns and cities will get $3.7 billion over the next three years under the Municipal Sustainability Initiative.
The budget does not include any new taxes or tax increases.
The Province is not borrowing money for operating expenses, but it is borrowing $5.1 billion for infrastructure. As well, the provincial debt will grow to $21.5 billion by the 2016-’17 fiscal year.
Interest costs are $421 million, or one per cent of total operating revenues. The Province has set a limit that debt servicing costs cannot exceed three per cent of operating revenues.
Hughes defended the Province borrowing money to pay for infrastructure and said the government is taking steps to ensure its debt is kept at a manageable level.
“This is about being ready for the tremendous number of people that are moving to Alberta as well and making sure that those of us who are here have the schools, hospitals and roads that we need to have the quality of life we have,” he said.
Highwood MLA Danielle Smith said it’s disappointing to see the government borrowing billions at a time when the economy is doing well and provincial revenues are at near record levels.
She said the Province can still build infrastructure without having to borrow.
“At what point does the debt max out?” said Smith, who is also the Wildrose Party leader. “They’ve already increased their debt projections, we’re going to have $22 billion worth of debt by budget 2016 and that gets us back to the same levels of debt that we saw in the Getty era.”
She said the Province will eventually have to repay the money it is borrowing and it’s a bill that will be left to future generations.
“It’s just a shame because it’s so avoidable. They could make simple changes today to avoid making some future generation bear the burden of having to pay all that money back.”
Okotoks Mayor Bill Robertson said he is concerned about the provincial government borrowing money to pay for capital projects.
“I wish they weren’t borrowing the money, to go back on a year-to-year basis, to go back into debt I don’t think is right.”
He said he would’ve been more willing to support a one-percentage point increase in the province’s flat income tax rate from up to 11 per cent.
He also doesn’t want to see the Province have to end up instituting a sales tax.
“That’s a huge advantage that we have here over other provinces in attracting businesses and people,” he said.
Robertson is pleased to see the MSI funding program continued.
The Town has earmarked its MSI funds to go towards its share of the cost to build the Foothills-Okotoks Fieldhouse and an expansion of the Town’s operations centre.
While he said the Town expected the funding will be available, the continuation of the project will ensure the Town isn’t left hanging.
“We’ve committed our dollars and we were given approval from the Province,” he said. “Of course, once you start a project you can’t apply for debenture funding. If they were to discontinue that it would pull the rug out from under our feet.”
Not all foothills politicians are concerned about the provincial government’s plans to borrow.
MD of Foothills reeve Larry Spilak said he doesn’t have any problem with the provincial government borrowing money to pay for capital projects, particularly as interest rates are low.
“We’re really lacking in infrastructure and that’s what’s forcing the Province into a borrowing capacity, we need schools, we need recreation facilities, we need highways,” he said. “With the amount of people moving here they cannot slow down the infrastructure.”