Alberta needs a deadline on its deficit era

Share

Rachel Notley has built up some much-needed political capital at home, and she did it the old-fashioned Alberta way – hitting back at those elites out east.

The New Democrat Premier scolded factions of her own party that would snuff out any hope for an economic recovery in the province by abandoning fossil fuels wholesale. This, after her government went big on tougher environmental standards and a carbon tax.

In no uncertain terms Ms. Notley criticized the Leap Manifesto, which has emanated from a cadre of the federal NDP. The Leapers would ban any new oil pipelines – the very things she's been clamouring for ever more loudly.

"Naive." "Ill-informed." "Tone-deaf." All that was missing was the mic drop and brief squeal of feedback to punctuate the split. Even many of her critics were taken aback by her forcefulness on the issue.

It shows Alberta's become an outlier on big parts of federal NDP thinking, and how Ms. Notley's government has come to realize it needs to be working for more than just its traditional base.

The timing couldn't have been better, just days before her Finance Minister, Joe Ceci, delivers a budget that will, in fact, reflect many closely held NDP values when Alberta's economy has been on a long and painful losing streak thanks to the collapse in oil prices. She'll need that political capital.

Mr. Ceci tables his budget on Thursday, and he and Ms. Notley have been upfront about the problems that have come with a lengthy recession, oil-patch job losses in the tens of thousands, a multibillion-dollar cut in spending by energy companies and squelched royalty revenue. The provincial unemployment rate has climbed to 7.9 per cent from 4.7 per cent before the bust.

Two years ago, non-renewable resource revenue totalled $8.9-billion. The figure for the upcoming budget is pegged at $1.4-billion, an 84-per-cent drop.

Meanwhile, the government has talked about the need to maintain education, health care and social services, especially as more people find themselves in need of support, and to stimulate the economy with infrastructure spending to the tune of $34.5-billion over five years.

The NDP has already warned of a $10.4-billion deficit, and the likelihood that it will have to tap debt markets to finance not just capital projects, but even some of its operations, as revenues remain low in future years. Mr. Ceci sees the need to protect quality of life in Alberta as not just an option in tough times, but a moral imperative.

The stimulus is a good idea – it makes sense to build big projects when there is little competition for labour from the oil sands sector, and when interest rates are low. Recall that Ms. Notley engaged the services of former Bank of Canada governor David Dodge to advise her on such matters and that was his prescription.

Alberta is not alone in deficit budgeting. Indeed, the federal Liberals took a similar tack, forecasting deficits and economic stimulus until, well, there are no longer any deficits.

Not having a target is one aspect of fiscal planning that Ms. Notley and Mr. Ceci shouldn't be emulating. But they are.

Mr. Ceci told The Globe and Mail last month that his government has abandoned its aim to erase the deficit by 2019, sending the right-wing opposition Wildrose Party into a tizzy. In fact, he said that sticking to any target for balancing the books could lead to draconian cuts to public services for the sake of sticking to a timetable.

If the government hopes to maintain its new-found momentum and credibility with Albertans, it should go back to putting a deadline on its deficit era, as difficult as that is, given the plodding recovery in the oil patch.

Indeed, credit-rating agencies have raised red flags about the province's budget calculus, especially rising debt levels, as oil prices remain stuck in a trough. In December, S&P downgraded Alberta's previously top-notch credit rating from triple-A to double-A-plus. Moody's Investors Service followed by affirming credit at triple-A, but it cut its outlook to negative.

Mr. Ceci said he realizes that the rating agencies and investors are looking for him to develop a viable plan and to stick to it. He's right, that is a major part of it.

But another is a timetable. And there's nothing like having one to provide the necessary urgency to get the job done.