The Alberta budget, the first provincial one of the year, illustrates how hard it is to reduce deficits quickly. Some of the lessons from that Feb. 24 budget might show up in Thursday's Quebec budget and the Harper government's one next week.
Alberta, of course, is the country's luckiest province, fiscally speaking. It's got $8.3-billion entering the treasury this year from royalties on non-renewable resources. That's a shade less than from personal income taxes. Take royalty revenues away and Alberta would have higher personal incomes taxes and/or a provincial sales tax.
Even with this $8.3-billion from non-renewable resources (estimated to rise to $11.8-billion in two years), Alberta's Conservative government can't balance the budget this year. It can't even balance the books after dipping deeply into the province's Sustainability Fund.
Over three fiscal years that included the recession, the government incurred $10-billion in deficits - small by Canadian standards, large by Alberta's. Not until 2013-2014 does Alberta plan to be in the black.
Many are the reasons for such a wealthy province staying in the red, but one stands out (as it does in every province): Alberta's health budget takes up 43.6 per cent of program spending. This year, government money to the Alberta Health Services budget will rise by 6 per cent; this increase is the second part of a five-year plan to raise the AHS budget by 6 per cent, 6 per cent, 6 per cent, 4.5 per cent and 4.5 per cent.
The arithmetic is simple. If the biggest part of a province's budget - now 43.6 per cent - is rising by 27 per cent over five years - something else has to give, provided a government doesn't wish to raise taxes. And give it is.
Only three departmental budgets this year are getting increases above inflation: agriculture, energy and the solicitor- general. Here are the ones with flat or declining budgets in actual or real terms: aboriginal relations, advanced education, culture and community spirit, education, employment and immigration, justice, municipal affairs, sustainable resource development, tourism, parks and recreation and the environment.
Looking ahead, the budget shows $2-billion of additional spending from now until 2013-2014. Of that $2-billion, $1.2-billion (60 per cent) will be for health. It's the same sort of projection for other provinces.
Alberta is lucky. It can spend $2-billion more provided non-renewable resources revenues increase as projected by $3.5-billion. Alberta will be able to balance the books without raising taxes. It won't even have to replace health-care premiums that it abolished.
Of course, there'll be nothing left to enhance the Heritage Fund or replenish the Sustainability Fund or spend a lot more on higher education. And, of course, the shoe will pinch when the 10-year health accord with Ottawa expires in 2013-2014, since no federal government will be as generous as the Martin government was in 2003-2004, when Ottawa was awash in surplus.
Alberta could eliminate its deficit faster and start preparing for future costs, to say nothing of investing more in the economy of tomorrow, if it were prepared to raise taxes or cut spending. But it won't raise taxes and it can't touch the health budget. If that budget grows at 4.5 per cent to 6 per cent a year, it would take a big knife to slice spending elsewhere. Obviously, this government doesn't want to wield that knife. (Nor does the Harper government.)
Other governments less fiscally fortunate than Alberta's (see Quebec for starters) don't have the luxury of doing so little, yet returning easily to surplus. Governments in Ontario and Atlantic Canada are in very weak fiscal shape, facing devouring health-care budgets. They can only dream of Alberta's good fortune.
In Ottawa, the Harper government doesn't want to make any hard decisions in case such decisions imperil its majority prospects. So next week, it'll offer only mild restraint in its budget, having just spent tens of millions of taxpayers' dollars advertising the billions it spent on its Economic Action Plan.