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A focus on jobs and a fair deal for Alberta in 2020 budget

Last Updated Feb 28, 2020 at 6:03 am MDT

Summary

Deficit forecast to be lower by about $1.2B

There will be a 20 per cent tax on the retail sale of all vaping products

The economic outlook predicts unemployment will decline steadily to 6.7 per cent over the next year

EDMONTON (660 NEWS) — With a spotlight on adding jobs and getting a fair deal for the province, the Alberta government has unveiled the 2020 budget.

By and large, it maintains the same themes as the first fiscal plan from the United Conservative Party, introduced after their election victory in April 2019, with similar commitments surrounding balancing the budget over the next three years.

The government starts off with some positive notes, including a lower than forecasted deficit — by about $1.2 billion — meaning taxpayers will pay $35 million less in debt-servicing costs. It is added that job prospects should be improving, in line with better forecasts in the oil market.

Finance Minister Travis Toews said there is still an extreme amount of volatility in the market, and they are not predicting a boom time by any means, but they are cautiously optimistic.

Revenue is expected to go up by a total of more than $8 billion by the end of 2023, and there should be a surplus of $700 million by the end of the cycle as well. A contingency fund of $750 million will be added into the funds as well, relating to a recommendation from the MacKinnon Report.

Further, promises around stable funding for education and health are maintained, although there will be some adjustments when looking further in detail.

The first major section in the budget, following in line with Tuesday’s Speech from the Throne, is a “Blueprint for Jobs”.

The economic outlook predicts unemployment will decline steadily to 6.7 per cent over the next year, with many people finding employment in the energy and construction sectors as the government is hopeful for approved pipeline projects and creation of jobs through a $6.9 billion investment into capital infrastructure. Full employment numbers should then be reached by 2023, meaning unemployment sits at around five per cent.

There are also jobs being promised in agriculture, in areas such as canola processing, plant protein, agri-tech and other emerging sectors.

Investments are also planned in tech sectors like artificial intelligence and quantum computing, while also adopting more digital health strategies that will go in line with reducing health costs in the province.

To fuel more growth in technology, a “sustainable angel capital ecosystem” will be fostered to attract companies and may be a way to replace an eliminated tax credit for digital media.

Jobs are also forecasted in tourism, as the UCP embarks on its “ambitious” strategy to double tourism spending by 2030.

The province’s international office network will be re-aligned to focus on key markets around the globe, strengthening relationships with investment attraction agencies, undergoing similar work as has been done by Premier Jason Kenney and his staff by travelling to places like London, England and Houston, Texas.

But while it is expected the economy will regain footing in 2020, with growth in GDP surpassing pre-recession levels, there are some possible hiccups concerning geopolitical tensions and the emerging coronavirus outbreak.

There is also caution that the problems surrounding a price differential in oil will continue, even with pipeline projects getting on track, and this differential is acting as a drag on corporate profits.

However, on the other end, there is a possibility revenues could surpass expectations if global oil prices increase even more than forecasted even with projections the global demand for energy — including fossil fuels — will continue to increase over the next twenty years.

Another new feature in this budget is a specific tab outlining a fair deal for Alberta, with the province’s Fair Deal Panel expected to report its findings on March 31.

The tab includes expansive details on the history of fiscal stabilization, equalization, health and social transfers, which have directed billions of dollars away from the province towards the federal government.

The province is calling for a $2.4 billion retroactive rebate on these matters, to make up for the payments made because of rules concerning resource revenues.

Toews noted that he does not know when or if this payment will be made, but said there is frustration about federal government policies and this money would show a tangible commitment to repair issues of unity.

But if there is no movement from Ottawa on the topic of equalization, Toews said there is preparation for a referendum as early as October 2021.

Alberta will also be making efforts to remove a mortgage stress test imposed by Ottawa.

MAJOR SECTORS

Lots of attention is being paid to sectors such as health, education and energy, with criticism being directed at the government over worries that spending will be cut and services will be reduced.

Once again, the UCP is committing to maintain or increase funding in health and education moving forward, however there are still several changes to unpack.

The ongoing review of Alberta Health Services expenses continues, after initial results were announced earlier in the year. This will include some changes to physician compensation, the seniors drug program, and a search for efficiencies in rural hospitals.

The adjustments to physician compensation and seniors drug plans will help prevent major increases in spending, but has also been a source of criticism from other groups.

There are no changes to previous announcements around mental health and addictions, including $40 million to respond to the opioid crisis, and supervised consumption sites will still be funded for now as results from a review of these facilities is still awaited. Toews said their focus will be directed towards growing treatment spaces.

The province is also aiming to provide 80,000 more publicly funded surgeries, partly by increasing the contracting of private providers, as well as boosting midwifery courses and increasing long term care facilities.

In Calgary, renovations will be made to the Peter Lougheed Centre ER, and there is a long list of other health projects in the province proposed in the budget.

Moving into education, the budget promises increases to all K-12 school jurisdictions — totalling $100 million. More money will also be provided for transportation, to the tune of $15 million in supplemental amounts.

There is also investment in new schools, including full construction funding for nine projects and two renovations, with more details on these expected through the year.

But there is what appears to be a cut, especially when looking at the increased enrolment in schools. The province’s portion of funding for school jurisdiction operations is actually going down this year compared to the earlier, but the province is saying this does not amount to a cut because school boards can make up the difference in their own reserves.

The budget notes the boards should have more flexibility and autonomy in these matters, and while the number of grants are being reduced it is hoped this can cut down on red tape and direct more funding into classrooms.

In advanced education, the government is concerned about costs being higher in this province compared to others in Canada, and they want to bring it more in line with counterparts.

There will be a three phase approach to the findings in the MacKinnon Report, starting with a new funding model that shifts away from applying increases to all institutions equally, regardless of performance.

After schools cut some staff in the previous months, the government says staffing reductions will have to continue and schools will need to implement new plans in line with government priorities.

Overall, advanced education operating expenses are $400 million lower than previously forecasted, and expenses will go under $5 billion dollars by the end of this four-year cycle.

Finally, to touch on energy, operating expenses are going down in that department and there is also a mention of a “robust natural gas strategy”, as well as continued reformation of the Alberta Energy Regulator (AER).

The province is once again expecting lots more investment in the oil and has sector, to around $1.5 billion, but these numbers could fluctuate depending on various market conditions. Toews is optimistic around projects like Enbridge’s Line 3, Keystone XL and the Trans Mountain Pipeline expansion and they should result in more barrels of oil hitting the market.

Even so, Toews feels they are not relying too much on oil prices, and the government is prepared to make necessary adjustments to the fiscal plan in the event that predictions do not exactly work out.

There is also a promise to help deal with a growing problem around orphaned wells, while money from the Technology, Innovation and Emissions Reduction (TIER) plan will help go into more emissions reduction tech — initiatives that may also help increase the amount of jobs.

TAXES

Also included in the budget are some light details on proposed taxes that will be introduced.

This includes levies on vaping products and short term rental properties, such as through Airbnb.

More details on changes to smoking legislation are coming up at a future date, but the budget already states there will be a 20 per cent tax on the retail sale of all vaping products — including liquids, devices and cannabis products. This tax is estimated to generate up to $8 million per year by 2021-22.

To bring short term rentals more in line with hotels, a tax of four per cent will be introduced, which should generate around $4 million per year.

There are exceptions, however, and no tax will be applied on rentals, not on online marketplaces or those listed for less than $30 per night and $210 per week. Legislation around these changes is expected in the spring.

A new child and family benefit is coming on July 1, with expected savings of half a million dollars compared to the previous benefit, while still helping about 190,000 families with $230 million in benefits in this fiscal year.

The education property tax will also be increased by 3.1 per cent, returning the proportion of education costs covered by the tax to about 31 per cent, which is closer to historical levels.

PUBLIC SECTOR COMPENSATION

In line with how the province is changing compensation for physicians, the public sector can expect tough negotiations in the coming year.

The budget notes that public sector compensation is creating a high amount of pressure on service delivery, with nearly 56 per cent of the operating budget coming from this piece of the pie.

The government says if spending was matched with other provinces, Alberta would save $3 billion every year — enough to cover all scheduled surgeries done over three years.

So unions should be expecting difficult discussions with the government, as the budget states Albertans cannot afford a public sector that is more expensive than other provinces.

However, even without a general salary increase, compensation will rise with in-range adjustments. Overall there is a call for tight controls on public sector compensation, with Toews saying that there will be reductions of two per cent with most losses being the result of attrition.

WHAT ELSE?

The budget is promising “disciplined and prudent spending”, with spending actually 1.7 per cent lower than the 2019-20 forecast and there are some savings expected over the next few years.

Nearly every ministry outlined in the budget predicts some savings, even with the province promising no major losses in terms of service delivery.

Social services will see a shift that prioritizes child care support for low-income parents, rather than the NDP’s $15 per day child care proposal. AISH is under “significant pressure” due to the fiscal situation in the province, with the budget showing these benefits are higher here than in all other provinces. Also, while seniors benefit expenses will go up, there are planned reductions in social housing and general seniors services.

Justice sees no major changes, with the province continuing to put a focus on boosting rural enforcement. However, there is a large boost in funding for victims of crime. At the conclusion of the Speech from the Throne, the first justice bill was tabled around protecting critical infrastructure, and Toews said that blockades and other such protests may cause some more volatility in the energy market.

There are savings in Environment and Parks as well, with a mention about how TIER funding will be split up and that 50 per cent of revenue after the first $100 million will be going to emission reduction projects.

Five per cent savings are coming in Municipal Affairs, including a further 25 per cent reduction in the Grants in Place of Taxes program.

The Transportation department will see some modest reductions in terms of non-safety related road maintenance and preservation activities. But various projects remain on track, including the ring road in Calgary and upgrades to Deerfoot Trail.

$5.6 billion in the capital plan focuses on municipal supports around roads, sewers and public transit — but per capita spending will be reduced.

There are no further changes on LRT funding, including Calgary’s Green Line, with the province maintaining the position that the funding will be phased in more slowly than first hoped but the overall commitment remaining the same.

Finally, the province is still remaining committed to the Springbank Off-Stream Reservoir (SR1) project, but a four-phase project around solutions for the Bow River Reservoir will be continued and includes a feasibility study around what can be done to mitigate flood risk in the wake of the 2013 floods that ravaged Calgary and southern Alberta. Flood recovery money is also boosted for the next three years, with the vast majority of it being directed into SR1. When it comes to preparing for things like floods and wildfires, a disaster relief fund of $1.2 billion will be established.