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Alberta's Premier Alison Redford speaks during the inaugural Principal’s Campus Forum at Queen’s University in Kingston, Ont., on Monday Nov. 26, 2012 (Lars Hagberg For The Globe and Mail)
Alberta's Premier Alison Redford speaks during the inaugural Principal’s Campus Forum at Queen’s University in Kingston, Ont., on Monday Nov. 26, 2012 (Lars Hagberg For The Globe and Mail)

PROVINCIAL POLITICS

Alberta premier rules out tax hike; huge deficit projected Add to ...

Alberta’s new fiscal framework could include infrastructure debt, the issuing of bonds, cutting doctors’ pay and, one day, a potential sales tax, Premier Alison Redford said as she begins to reveal details of her looming budget.

In a call with party supporters Monday evening, Ms. Redford ruled out tax increases for this budget but left the door open to a “conversation” on taxes coming up. She didn’t rule out a PST – Alberta currently doesn’t have one, and it’s long been considered politically untouchable – but said the government would first look for any savings it could find.

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“It’s been a really important part of the conversation that I think Albertans have started to have, whether we’re talking about healthcare premiums or sales taxes, and I think there’s a place for that conversation,” Ms. Redford said, before signalling she wants to get spending down first. “Before we start talking about these issues, we want to make sure Albertans have confidence that we’ve done absolutely everything we can in government to be prudent and responsible and accountable with taxpayer dollars. So that’s our priority for this budget.”

Alberta’s budget is due March 7, and is expected to show a large deficit due mostly to falling projections for energy revenue. Cabinet ministers are now considering a range of cuts and, according to one, potential layoffs. The province relies on oil and gas royalties to fund nearly 30 per cent of its spending – when those revenues fall, the budget is thrown into crisis.

“We cannot continue to rely on oil and gas revenue to the extent that we do,” Ms. Redford told party supporters Monday evening. To do that, she has made vague overtures to changing Alberta’s fiscal system, which might include saving some energy windfalls, using debt to pay for roads, schools and hospitals – likening it to a mortgage, of sorts – and overhauling the budget.

“You know what? We can’t weather the storm [like] before. It’s not about simply making decision, crossing our fingers and hoping the price of oil goes up,” she said, adding she hopes to diversify the economy. “At the end of the day, we’ve got to do it all. We’ve got to diversify the economy, we have to make some of those long-term investments and we have to make sure we’re making the right choices with respect to what sustainability looks like.”

The picture of how she plans to wean the high-spending, low-tax province off oil and gas remains unclear, though details began to emerge in Monday’s question-and-answer telephone call with party supporters. One asked whether she’d consider issuing bonds. Ms. Redford suggested that’s in the offing as a way to avoid a “social infrastructure deficit,” or a shortage of schools and hospitals. Asked specifically if the province, debt-free since 2004, will be borrowing to pay for infrastructure, Ms. Redford replied: “Yep, we are.”

She also issued a warning to doctors, who have been locked in a lengthy contract battle with the province. The province spends $3.4-billion a year on doctors’ fees – one-fifth of total health spending – and its doctors are the best-paid in Canada. “At the end of the day, I think that’s really where we start to save some money with respect to things like healthcare,” she said.

Not all, however, is clear. Ms. Redford warned of “tough choices” in this budget, but didn’t specify them. Instead, she planned to “keep building Alberta” while leaving the tax rate unchanged for now. “We know that people came to Alberta, and came to Alberta, because of our low tax rate. And we’re going to maintain that.” Without large cuts, a tax hike or both, Ms. Redford faces a large deficit.

While speaking to about 5,000 party supporters who dialed in, Ms. Redford took some shots at her chief political rival, the Wildrose Party, which she said would build “nothing” if elected. Wildrose had proposed building more slowly and delaying some projects, not stopping building altogether.

Ms. Redford also told callers that Alberta is getting less and less for its oil, saying the price is about $45 to $55. The differential between the North American benchmark price – about $96 on Monday – and the lower Alberta price is wider than averages of recent years, but not as bad as Ms. Redford told her party’s members. Alberta still receives about $64 per barrel based on Monday’s prices, and the price differential is roughly the same as it was during last year’s election, during which she laid out several spending pledges.

In an earlier interview, Wildrose leader Danielle Smith said Ms. Redford should have known about the price differential.

“If she is just now finding out about this differential and the impact it will have on their budgeting, that’s very serious, because everyone has known about the difference between the two,” Ms. Smith said, adding: “This is the reality for Alberta for the next several years, and what we’re seeing is we have a premier who is completely unprepared for that reality.” Wildrose declined to comment on Ms. Redford’s call Monday evening.

Ms. Redford also announced she’d visit incoming Ontario Premier Kathleen Wynne on Wednesday, when the Alberta leader is scheduled to make a speech to the Canadian Club in Toronto’s Royal York Hotel. Ms. Redford said she plans to appeal to Ms. Wynne for support in advancing a so-called Canadian Energy Strategy that Alberta is pursuing. Ms. Redford clashed with Ms. Wynne’s predecessor, Dalton McGuinty, over the effect of Alberta’s energy economy on Ontario’s manufacturing sector.

Follow on Twitter: @josh_wingrove

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