Alison Redford appears destined to go down in history as the premier who introduced Albertans to a fact of life most Canadians have lived with for generations: a sales tax.
It won’t happen in the budget she will introduce in early March – she has said as much. Instead, it would appear the province will run another deficit – its sixth in a row – rather than make the kind of draconian cuts necessary to balance its books. But a sales tax is coming. There seems no escaping it now.
It’s all rather hard to believe. For years, Alberta has been the economic envy of the country, awash in petro dollars that allowed a succession of premiers to avoid the hard choices their counterparts in other parts of the country have been forced to make.
When spending got truly out of hand, Ralph Klein took a cleaver to things. But then it resumed as normal, with successive governments radically expanding the size and cost of the public sector while exhausting money supplies in the province’s Sustainability Fund. For more than four decades, Alberta’s Progressive Conservative governments have blithely ignored the possibility that, one day, oil money might not be there to bail them out.
Well, the moment of reckoning has arrived.
Ms. Redford has been on an exhaustive media blitz to explain how it’s come to pass that the province finds itself in the economic pickle it does. Some $6-billion in projected oil revenues have disappeared for the coming fiscal year. The province’s sole customer, the United States, doesn’t need bitumen the way it once did. Subsequently, prices have tanked.
Alberta has to find new markets for its oil – that has been clear for some time. More specifically, it needs a route to Asia, where expanding economies still require lots of energy. Asia offers Alberta an economic upside that would be worth tens of billions to the province’s economy. The easiest way to get oil there would be by pipeline to the West Coast. We all know where those efforts are going – nowhere. So the province is looking at alternative avenues, such as through the north, east and even down through the U.S.
But any of those options is years away. Alberta, meantime, will get what it gets shipping its product south. And that will mean the provincial treasury will also get what it gets. Right now, Ms. Redford’s government has made a commitment to funding programs, services and construction that’s simply beyond its means.
Taking an axe to these areas is never fun, as Mr. Klein discovered. First, Albertans aren’t used to it. They’ve become spoiled over the years, including public-sector workers whose wages are the envy of counterparts across the country. Ms. Redford has an additional problem: Nearly 100,000 people are pouring into Alberta each year to take advantage of its robust economy. (An estimated 1.3 million people are forecast to move to the province over the next 20 years.)
The Premier has committed to spending nearly $4-billion to build 50 new schools and 140 medical clinics and postsecondary education facilities. When you have people arriving at the rate they are, you’ve no choice but to build the infrastructure necessary to accommodate them.
But Ms. Redford does have options when it comes to asking Albertans to help pay for it all. It’s lunacy to be running deficits while not having any sales tax in place to help finance all that people in the province enjoy.
Next month, the Premier is playing host to a summit that will focus on changing Alberta’s fiscal landscape and removing the volatility inherent in an economy tied to the shifting prices of non-renewable resources. Noted Alberta economist Jack Mintz says the province needs a long-term financial plan – one that insists that expenditures not exceed economic growth, as they have.
He’s also said he thinks it may be time for the province to look at a consumption-based sales tax such as the HST, which most of the world has moved to. It’s the kind of foul-tasting medicine Ms. Redford needs to deliver to Albertans – whether they want it or not. Sooner than later, that voice you hear will be the Premier’s, asking people to open wide.