Alberta’s Finance Minister warned on Tuesday of a “period of restraint” as he released the government’s first fiscal update since the provincial election, arguing that the province must reverse a trajectory of increasing expenses and flat-lining revenues.
The quarterly update, which outlines the province’s finances from April to June of this year, shows increases to oil royalties and income tax compared with the same period last year, although decreases in other areas mean overall revenues were about the same compared with a year ago. Operating expenses were up by $270-million.
The document, at just a page and a half, does not include any projections or economic data that would typically be found in a quarterly update, which are often a dozen pages or more and provide a detailed picture of the province’s finances and economy.
The United Conservatives came to power on a promise to freeze spending and get the province’s debt under control. A government-appointed panel spent the summer looking for areas to cut before the 2019-20 budget is tabled in October.
“I’ll be frank: These numbers do not paint a rosy picture,” Finance Minister Travis Toews told a news conference in Edmonton.
“We’ve been clear all along: Given the state of Alberta’s finances, we are entering into a period of restraint. There’s no doubt about that," he added later.
Non-renewable resource revenues increased by $164-million, largely owing to an increase in bitumen prices related to government-ordered production cuts, and income taxes were up by about the same amount. Those increases were offset by decreases in other areas, such as lower income from the agency that oversees gambling, liquor and cannabis.
While operating expenses increased compared with the previous year, overall spending decreased as some capital grants were put on hold during the election. The deficit for the quarter was $835-million, about $365-million less than the same period last year.
Mr. Toews declined to provide any economic projections for the rest of the year, saying those figures would be included in the budget. He acknowledged that a 1-percentage-point corporate tax cut that took effect July 1 would hurt revenues.
But he also argued that the government’s plan to slash corporate taxes by a third, gradually dropping the rate by 4 percentage points to 8 per cent, would lead to increased economic activity that would eventually boost tax revenues. He said that it could be four or five years before the province is bringing in more than it loses from the cuts.
He also noted the previous government was on track to bring the provincial debt up to nearly $100-billion by 2023-24, but he did not provide any new projections of his own.
University of Calgary economist Trevor Tombe said the fiscal update is so brief that it’s impossible to say anything about the state of the province’s finances.
“This contains almost nothing of any use or relevance to understand Alberta’s current fiscal situation,” Dr. Tombe said in an interview.
“You can’t conclude anything about where we’re headed in this fiscal year just from three months of data. The timing of money in, money out – you can shift that around.”
Premier Jason Kenney also accused the previous NDP government of lying about the province’s finances and in particular exaggerating resource revenues.
Dr. Tombe said there was nothing in Tuesday’s fiscal update to support that claim.
New Democrat David Eggen said the fiscal update is designed to provide political cover for spending cuts. He said that when revenues are flat, that’s precisely the wrong time to be reducing corporate taxes.
“It all seems like a setup for cuts in the fall," he said.
“And when facing difficult economic times, don’t double down by laying off teachers, nurses and other essential public services. You will only exacerbate the problem.”
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