The Alberta budget might be entitled “The Right Plan,” but it should have been named “The Spend Plan.” The first budget under provincial Tory leader Ed Stelmach calls for record spending of $37 billion.
“It’s a spending budget, admittedly,” Finance Minister Iris Evans told reporters beforehand.
Most of the money the government will dole out is earmarked for healthcare. Last year 36.5% of total government expenditures went to healthcare spending — this year that will increase by 9.2% after the government eliminates the province’s healthcare premiums — currently worth $1,056 per family.
John Carpenter, CEO of Alberta’s Certified General Accountants Association, says this type of healthcare spending is a solution for the present, but not for the future.
“Without innovative, economically sound and rapid changes to the way healthcare is delivered, we risk falling even further behind,” he says. “Spending our way out of the problem is a short-term fix at best, and as our population ages, it’s not sustainable.”
He does say, though, that eliminating the premium was a wise move. “I characterize this as a tax cut,” he says. “And that should be the number one tax to cut.”
Other spending includes about $22 billion on infrastructure needs such as hospitals, schools and roads, and $100 million to create the Alberta Free Enterprise Corporation, an organization that will help companies start up high-tech initiatives.
While Carpenter sees the need for spending, he’s concerned that the government is living too much in the now and not planning ahead. He says the Alberta economy is rife with risk. The revenue model is heavily resource-based and, with oil at high prices, new fuel alternatives could threaten the province’s fortunes.
“We’re concerned the future is not on the agenda,” he says. “If you look at Alberta’s past, we paid off the debt, which was the right thing to do, but then there was no longer this compelling need, beyond consumption spending, for fiscal discipline.”
While the spending figures have a lot of Albertans talking, there’s a good chance the Conservatives will end up spending even more before the year is out. That’s because the government based its figures on oil being worth $78 a barrel. That’s a big difference to today’s $117-a-barrel figure.
“It’s been a challenge for the government to forecast any sort of commodity price,” says Carpenter. “There’s a very significant difference between $78 and where we are now.”
That means, when it comes time to present its quarterly reforecast, the government will “realize a very substantial surplus.” Right now, the Tories estimate a $1.6 billion surplus.
It’s expected the government will channel part of the extra money into its Heritage fund and put another portion towards capital spending.
While an additional surplus isn’t a bad thing, many in the province are wondering the same thing Carpenter asks: “Why not budget with a little more foresight?”
On top of this spending, there are some additional tax breaks beyond the elimination of the healthcare premium.
The government increased the Alberta Employment Tax Credit by 10%, which should save a middle-income family with two kids about $316 a year. There was also a $1,000 increase in tax benefits for disabled Albertans or for those caring for the disabled.
A new 10% credit for scientific research and experimental development was introduced, and will take effect January 1 of next year. As well, the amount of income that can be taxed at the small business rate of 3% was increased from $430,000 to $460,000 effective April 1 of this year, with a further increase to $500,000 planned for next April. The government says the move will save Alberta businesses about $5 million this year.
Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com
(04/23/08)