CALGARY — The $6-billion revenue shortfall in the coming budget year is finally confirmed by Premier Alison Redford. She calls this the “bitumen bubble,” although it seems more like a crater.
Apart from that one fact, there was disappointingly little detail in Redford’s televised speech Thursday night.
Her strategy for tackling the province’s immense challenges remains murky — not just to us, but perhaps to her as well.
Next month, she’ll hold an Alberta Economic Summit to consult “industry experts, business and not-for-profit sector leaders and academics from our colleges and universities.”
We won’t get all the answers in one day, she added, but “it will allow us to continue the conversation.”
But really, how long can this yakking go on, and how useful is it on the virtual eve of the budget?
The date has already been announced — March 7. There’s little chance that a summit held a few weeks before will alter decisions already being made by politicians and bureaucrats.
This summit is sure to be a political exercise more than an economic one. If you care to bet, put your money on a stacked consensus that there must be some cuts, but more borrowing.
Cuts there will surely be. Even Alberta cannot swallow a $6-billion revenue loss without serious pain.
“Some programs and services will change,” the premier said, “especially those that are not sustainable over the long term.”
The language was vague, as usual, but the meaning is clear enough.
It’s highly likely, according to government sources, that smaller programs within departments will be cut back or wound up entirely.
Health care will get a small increase, apparently; but to afford that, plenty of this lower-level government clutter will have to go.
Ten days ago, the government appeared to be looking for about $1.5 million in operating cuts and $1 billion in capital project deferrals.
Now, there’s talk that the capital target may rise to $2 billion.
If that much is deferred, Redford could continue to argue that she’s “building the province” because nearly $5-billion worth of projects would still go ahead, many with borrowed money.
The capital and operating cuts would knock $3.5 billion off next year’s $6-billion revenue loss. Other factors may intrude, but the math suggests a projected deficit of some $2.5 billion in 2013-14.
Two things are inevitable in a revenue crunch that comes with a flat promise not to raise taxes — lots of borrowing, and government layoffs. Redford didn’t mention either in her speech.
She did say, however, that amid this fiscal crunch “we have a plan to once again begin investing a portion of our resource revenue in the Heritage Fund — the first time that will have happened in over 25 years.”
Every PC government has talked about this for 25 years. Not one has ever done it. To promise this now takes Redford’s rhetoric to the level of wishful thinking, if not actual fantasy.
Wildrose Leader Danielle Smith immediately attacked Redford for having no plan or vision. The whole problem was predictable the moment the PCs dropped their last budget before the 2012 election, Smith claimed.
One thing surely was predictable back then — the problem caused by this price differential between West Texas Intermediate crude and Alberta bitumen.
Along with Redford’s speech, the government released a chart that showed the differential was almost as wide last spring, during the budget debate and the election campaign, as it is today.
Back then it was never mentioned. Today it’s suddenly a crisis. If you feel somewhat manipulated, welcome to the fiscal support group.
Don Braid’s column appears regularly in the Herald.