Saturday, 9 March 2013

Alberta Budget:The good, the bad and the ugly

The 2013 budget has many surprises for Albertans; however they are not all good ones.
The Good:
This budget has no increase in taxes, and a promise of a balance budget next year. A cut in the price of generic drugs and the introduction of means testing for supplementary health benefits is a step in the right direction and it will save $270 million a year. While a savings plan is introduced, for the Contingency Account and the Heritage Fund, this budget also proposes to borrow for infrastructure to the tune of $4.3 million. The later policy is cautiously supported by IPSA, because we believe that long term assets should be financed by long term debt. However we believe that the government policy may go south if interest rates go up. Education property taxes are  reduced 1.8%, but that will not be seen by taxpayers as greedy mayors will quickly appropriate it. More importantly we must have a clear definition of ‘infrastructure’ to be included in the borrowing policy. We do not want to see borrowing to cover a professional sport arena for example.

The Bad:
The new three pronged format of the budget makes it very difficult to compare with previous years and the separation into, capital, operating and savings makes it difficult for even seasoned accountants to get to a bottom line deficit. This is a bit of slight of hands. To date the deficit ranges from $2- 6 Billion depending on your point of view.
Senior Property tax Assistance program will be scrapped in 2014. Farmers will be hurt and cuts to certain programs have not been well thought of.

The Ugly:
No increase in spending beyond last year’s $36.4 billion, but there are no cuts above the previously announced 480 managerial jobs. No restructuring of service delivery or privatization. This means that labour cost will continue to grow. The problem is that Alberta will continue under the same model without having the leadership required to reform the delivery of health and education services. The Senior Property tax Assistance program will be scrapped in 2014. It is possible that the debt level may rise to $16 billion within the next 3 years.

In our opinion this budget is a disappointment, because the government had the opportunity to make radical changes but has not done so. As the economy picks up it would have been the appropriate time to make huge cuts in spending, including layoffs. Should the price of crude remain the same Alberta may well continue on its path of yearly deficits: that would be a shame.

Marcel Latouche

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