Sometimes the numbers just refuse to fit the narrative.
Alberta Premier Jason Kenney has been hinting darkly that the previous NDP administration left the province’s finances in far worse shape than expected.
This week Finance Minister Travis Toews released the first quarter fiscal update, saying the numbers don’t paint a rosy picture.
The numbers actually paint sort of a blah beige picture. Compared year over year, revenues held steady at $13.4 billion. Expenditures went down a tick, sinking $364 million to $14.3 billion.
The provincial deficit stood at $835 million, around $365 million less than the deficit figure in first quarter 2018.
There are a couple of good signs in the update – personal income tax revenue and oil and gas revenue were up a bit, possibly due to a strengthening economy and a narrowing price differential on Alberta oil. There are some warning signs – the debt servicing number is $93 million more than the year before.
But the numbers, and there are far fewer of them than recent administrations of any political stripe have offered up, don’t look that horrible.
Scant wonder then that Toews skated pretty quickly over the actual fiscal update in his extremely brief opening press conference remarks. Instead he wanted to talk about debt numbers, historical and projected into the future, dire enough to make a fiscal conservative blanche. The NDP plan would have resulted in a debt topping out at $120 billion by 2024, he stressed several times.
He had those numbers memorized but when asked about the province’s debt to GDP ratio he replied he didn’t know that figure off hand. Really? A finance minister tasked with reporting on the province’s fiscal position can’t pull that measure of fiscal health out of his head.
Of course the figure wouldn’t fit the narrative. Alberta has one of the lowest ratios among Canadian provinces.
“I don’t believe this should be a race to the bottom,” Toews told a reporter challenging the debt level issue.
While the fiscal report’s scant pages did include debt projections, other revenue and economic projections which would normally be included were absent. Nothing on the expected price of oil going forward, for instance, a staple at most budget related newsers in the province. That sort of long view won’t be available until the fall budget.
The overriding message and the narrative going forward, is the one Kenney has been hitting hard for months. The province has a spending problem and spending must be reined in to balance the budget and begin paying down the debt.
While front line service cuts would be a political liability, the UCP face a problematic shadow on the revenue side.
Toews pointed out that revenues were flat year over year for first quarter.
But galloping up on the flank through the budget year will be UCP election promises to hobble those revenues further. The province’s carbon tax was axed. Unless the UCP kills every measure, incentive and grant associated with that tax, that will affect the equation.
And more telling, the UCP has promised to cut the corporate tax rate from 12 to eight per cent over four years. The government is convinced the lower taxes will spur the economy and make up that for the revenue shock. But Toews admitted it’s not expected the corporate tax revenue line will recover to pre-UCP levels for about four years, and that’s based on robust business growth.
The government vowed to speed up the cut if the economy comes roaring back more quickly than expected. But Toews made it clear that the inverse is not true. If the tax cut doesn’t bring economic growth and more jobs it will go ahead anyway because the UCP campaigned on it.
Oh and for anyone out there quietly whispering “sales tax” save your breath. That isn’t happening.
David Eggen, the NDP finance critic, called the scanty fiscal update an “absolute joke”. The NDP is arguing that the numbers vindicate the NDP plan to bring the province’s deficit down since there was a downtick on the deficit number from last year.
It’s a bit thin to argue that on a quarter over quarter basis. There are factors here that make even these vanilla numbers a bit shaky, including the whole general slowdown on program spending which resulted from the change in government.
The budget numbers should be a bit more complete and reveal a bit more of the balance sheet story.
But the budget narrative, the epic tale of politically driven debt-slaying and tax cutting economic stimulus, is the one that Albertans will be living for the next few years.
Photo Credit: CBC News
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