Alberta Government: Spending Problem or Revenue Problem

[albertGQ]

There was a segment on Global News tonight and they mentioned that in order for the provincial government to balance their books, they must find ways to generate revenues instead of cutting expenses.

I agree with them that we shouldn't be relying so much on natural resource revenue, but I'm not in favour of what they were proposing. They mentioned that it may be time for Alberta to implement a sales tax. I'm not sure why any current governing party would agree with this. Even if you may think that this is an efficient tax, you must agree that this is an unpopular one. So unpopular that it may cost your party the next election.

They also mentioned going back to a progressive income tax system instead of our current flat tax (I know, our current system is not a true flat tax).

Ted Morton did dismiss both these ideas when asked, but what do uou guys think? CP has had many great economic and political threads.

Does the Alberta government have a spending problem? A revenue problem? Both? Should we look at finally implementing a sales tax? Should we change our provincial tax structure back to a progressive one?

One small thing I've been a fan of is to treat our Heritage Fund the way Alaska treats theirs. The income generated from that fund should be reinvested back into the fund instead of going into general revenues. The real value of that fund is declining on an annual basis. If we followed the Alaska model, we would have approximately $100B in that fund now. With a fund that large, our dependance on natural resource revenues would be vastly lower

Thoughts?

[Dan02]

I think right now it's more of a spending problem, it seems every time a report comes out Alberta manages to be one of the most inefficient provinces and Calgary one of the most inefficient cities in terms of bang for our buck. What's the solution? Hell if I know.

As for the Heritage fund, I completely agree with you. A certain portion of Oil revenues should be going into the fund to build it up for when those revenues are no longer coming in. Right now Alberta is essentially a one trick pony, if we don't use our resources now to prepare for the future then one day maybe not next year, maybe not 20 years, maybe not even 50 years down the road, we're gonna be f'ed

Let's not just look at Alaska but Norway as well. In 20 years they've managed to build a fund worth 443 billion.

I guess the real problem is we elect our government on what they're going to do for us today, not how they're going to set us up for 20 years down the road.

[albertGQ]

It looks like I forgot to state my opinion. I agree with you as well Dan. I think we have ourselves a spending problem. I've read reports where our spending has increased at a much greater rate than our revenues and GDP growth. That is definately not sustainable.

Although the rich do benefit the most from our flat tax structure, but I think it would be a mistake to abandon it and go back to a progressive system.

[Patrick]

You want to balance the books, cut government admin. There are far to many agencies/ministries whose admin positions can be centralized and 1 person can do the job instead of multiple people in various ministries. Its rediculous how bloated government admin costs are in Alberta.

[Slava]

I find myself more and more interested in a consumption tax in general, where income tax is abolished and you pay a tax based on your consumption. I am worried about how this might effect some of the communities close to the border (as it would be higher than the provinces they border most likely), but it would be worth considering in my opinion.

I'm also not sure on the spending vs. revenue problem. I guess my thinking is that its a spending priority problem. The revenues are what they are, but I don't want to services cut. To that end I'm more in favour of cutting administration. I feel the same way about the Calgary Board of Education and them not cutting front line positions and look for areas of admin to be cut first, if any positions need to be.

Some of the statistics are misleading in general; the increase in spending is probably really high. So is the level of immigration into the province. We also faced enormous cuts as a province in the relatively recent future and probably over-cut at that point. Returning to something sustainable means a huge increase in spending to get there.

The handling of the Heritage fund is a disgrace. There was a political leader advocating that the government put away some money for the tough times that would eventually come, but that didn't get a lot of press or public support.

[WilsonFourTwo]

Not too take the easy way out, but I think both problems exist in spades. The province hasn't managed health care or education costs (the two biggies) very well in 25 years, and now find themselves requiring huge increases just to get back on track.

And I gotta ask.....why aren't we building portable classrooms and building "Lego Schools"? When community needs shift, the assets are relocated. This idea has been around for decades.

On the revenue side, I'm actually a fan of progressive income taxes - although I don't think there should be a much more than a 20-30 point spread from lowest to highest bracket. Call me whatever you want, but I do think that those who earn "Have a lot" should be expected to contribute more. $3,000 is what I spend on vacation, but to many others, its a months salary and allows them to get by.

More important than taxes though - I STILL don't think we're getting anywhere near the cash we should for our natural resources. We've got (perhaps) 100 years of the stuff left, and we're giving it away. I'd rather get see that province get $1 Trillion over the next century than $300 billion over the next 50 years.

[WilsonFourTwo]

Originally Posted by albertGQ

One small thing I've been a fan of is to treat our Heritage Fund the way Alaska treats theirs. The income generated from that fund should be reinvested back into the fund instead of going into general revenues. The real value of that fund is declining on an annual basis. If we followed the Alaska model, we would have approximately $100B in that fund now. With a fund that large, our dependance on natural resource revenues would be vastly lower

This final paragraph answers your initial question. The heritage fund was initially setup to create an income producing pool. That's where 30% of the resource revenue was going....until 1987 when Don Getty's government stopped the transfer. It's great that the fund contributes to hundreds of millions each year, but had we kept investing in it, fund income could very well outpace royalty income by now. (and we wouldn't need to talk about "Cut This, Increase That")

[LChoy]

From my government perspective

If we take all the tax money from every man, woman, and child in Alberta, that would only barely cover the budget for Health.
Unfortunately in Alberta, most of our revenues are generated by Natural gas royalties.

[mykalberta]

They should get rid of the flat tax long before they implement a sales tax.

They also have a severe spending problem. For all major departments they should average out the per person cost in Ontario BC and Sask and should be no higher than 5% over this average.

There is no need to be grossly outspending other provinces in Health, Education, etc etc etc.

[WilsonFourTwo]

Originally Posted by Lchoy

From my government perspective

If we take all the tax money from every man, woman, and child in Alberta, that would only barely cover the budget for Health.

Does that not send up a red flag?

What I see is a trimming of beds/services, and not the ground-up rebuild that's clearly needed. It's embarrassing as an Albertan much more than most, and get less than usual.

[Cowboy89]

Originally Posted by Slava

I find myself more and more interested in a consumption tax in general, where income tax is abolished and you pay a tax based on your consumption. I am worried about how this might effect some of the communities close to the border (as it would be higher than the provinces they border most likely), but it would be worth considering in my opinion.

I'm also not sure on the spending vs. revenue problem. I guess my thinking is that its a spending priority problem. The revenues are what they are, but I don't want to services cut. To that end I'm more in favour of cutting administration. I feel the same way about the Calgary Board of Education and them not cutting front line positions and look for areas of admin to be cut first, if any positions need to be.

Some of the statistics are misleading in general; the increase in spending is probably really high. So is the level of immigration into the province. We also faced enormous cuts as a province in the relatively recent future and probably over-cut at that point. Returning to something sustainable means a huge increase in spending to get there.

The handling of the Heritage fund is a disgrace. There was a political leader advocating that the government put away some money for the tough times that would eventually come, but that didn't get a lot of press or public support.

Spending per capita is grossly out of line in Alberta, even after adding a million people this past decade.

The real issue is that the civil service isn't getting it's bang for its buck because of the cronyism that will inevitably happen when the same party is allowed to reign for close to four decades. We need a change of governemnt for a long enough time to dump tory friendly civil servants.

With regards to said leader who called for the Heritage fund to pocket 100% of oil and gas revenue during the last boom - Definately good advice, however after review of said leader's policy planks in the ensuing election I was hard pressed to find proposals that meant less spending as opposed to the multitude of planks advocating more spending. Somehow while spending billions more he proposed we save 100% of oil and gas revenue. Simply did not add up, just like his election fortunes.

[Azure]

The only way I support a fair tax, or a sales tax as its more widely known, is if income tax is completely abolished. Then I would absolutely love the fair tax.

As for the spending/revenue problem. You can't up taxes and just think it will increase revenue and you'll be good to go. You have to think for the long-term.

Which brings us to the actual problem in Alberta. Nobody ever thought about the long-term. The Heritage Fund wasn't managed properly(see Norway/Alaska like some people mentioned)....but also, Klein cut back to hard to get the province back on track. I agree that cuts were needed, but he crippled the province a bit too much.

We should have cut back bit by bit, and looked at the long-term. We were going to get out of debt and get rid of the deficit anyways, but we could have been more smart about it.

Right now we have to cut back, obviously to get the budget under control. Although I do think we'll come out of this 'recession' just fine and will be running another surplus down the road. Especially if oil stays up, and hopefully natural gas will go up too.

[puckluck]

They definitely have a spending problem. I'm not sure if other provinces pay for people's rent like the Alberta government will by simply signing a few papers.

I really don't care if this sounds racist or anything, but there is no way the government should be helping out the new Sudani immigrants or refugees to the tune of tens of thousands of dollars. They are taking advantage of the system. I witness it first hand when the government mails in a cheque to my dad for their rent because they supposedly can't afford it. And this isn't just one family doing it almost all of them are doing it while riding around in their $15,000 dollar car. Makes me sick that the system is so easily manipulated.

EDIT: We even had one family get a whole truck load of new furniture paid for by the Alberta government.

[Azure]

Welfare is a completely different issue, and I would suspect in the grand scheme of things it doesn't account for much spending.

That being said I agree that the system needs to be reworked.

[puckluck]

Originally Posted by Azure

Welfare is a completely different issue, and I would suspect in the grand scheme of things it doesn't account for much spending.

That being said I agree that the system needs to be reworked.

But it's not Welfare. It's a program that pays for people rent when they say they can't afford it.

[Azure]

Program is called what? I've never heard of anything like that.

[puckluck]

Originally Posted by Azure

Program is called what? I've never heard of anything like that.

The renters aid program.

Here is a link that talks about it: http://www.cbc.ca/canada/edmonton/st...s.html?ref=rss


The government thought it would cost them 7 million and it ended up costing them 121 million.

[Azure]

You gotta be kidding me.

I had no clue that was going on.

Subsidizing rent isn't exactly a long-term investment. Again, just a classic example of the province thinking short-term.

Spent at least $100 million of that $114 million on low income housing. Geez.

[puckluck]

Originally Posted by Azure

You gotta be kidding me.

I had no clue that was going on.

Subsidizing rent isn't exactly a long-term investment. Again, just a classic example of the province thinking short-term.

Spent at least $100 million of that $114 million on low income housing. Geez.

Exactly.

There are so many ways they could have spent that money. My dad was paid probably around $50,000 from that program with different tenants, and before the program they had no problem paying their rent.

I guess they saw it as free money, which it was. All they had to do was be late on their rent and then they would get a two weeks notice from the landlord and show it to the government. About 2 weeks later a cheque was in the mail for the full rent.


EDIT: I'm not saying everyone who used that program were scamming them, but it was obvious some were. I understand there were people who actually needed the program but I think that there could have been different ways to go about finding out who needed it and who doesn't.

[WilsonFourTwo]

Originally Posted by puckluck

The renters aid program.

Here is a link that talks about it: http://www.cbc.ca/canada/edmonton/st...s.html?ref=rss


The government thought it would cost them 7 million and it ended up costing them 121 million.

Wow....that's pretty special. I'm amazed something so expensive can exist in such silence - I for one have never heard of it.