Top Ten Reasons Alberta’s in a Deficit

[Daradon]

I hardly think those are the TOP ten reasons Alberta is in a deficit.

You'd be hard pressed to find a western nation/province/state that's turning in a profit during this global recession.

I will admit the raises and positions chaps my hide a bit. Politicians seem to have no sense of dignity, like economic downturns don't affect them. I'm not sure how one could give themselves a raise when everyone else is doing worse. It's not just bad form, it's flat wrong.

Course I think the raises were given out before the crash really hit. Yeah the indicators were there and they should have known better I agree.

I'm also not sure to the extent of everything you've posted. I'm wary of stuff that comes out from any politician. Nothing against you as a poster, and I like having you on the site. I just know how these games work, how the parties argue. How they frame their attacks.

I'd double check but to be completely honest, it's not a huge deal to me right now.

Because I haven't voted PC ever in Alberta. I didn't vote for Stelmach (voted Liberal) and I never voted for Ralph. The only thing I could do is write my MLA, which I have done on occasion. But I don't think that's really the point of your post.

[First Lady]

Last night I read everyone's comments and I do appreciate all of them. Todd's piece was meant to generate discussion as we lead up to the budget being presented in April. Is it a bit tongue-in-cheek? Yes. And it is quick and short so people will read it.

Also, so hopefully a few small papers pick up on it. It is no secret we have difficulty getting press when we don't hold a seat in the Legislature. But think about the opposition parties who do hold seats. They are not going to make any noise about spending. The Libs and NDP are all about spending your money.

At any rate here are my thoughts on why I think we are in this situation.

How did Alberta get into a deficit situation?


Some seem to think my earlier posting of “Todd’s Top Ten” is laying too much responsibility with Ed Stelmach. Certainly it is difficult and likely not fair say he is responsible for the entire state of our economy. But let’s take a look at a few facts.

First of all there are few who would deny the major driver of our economy is the oil and gas sector. Not only are they a source of a large percentage of our provinces revenue; they also keep many spin off businesses alive; hotels, restaurants and numerous service companies that cater to specific segments of the industry to name a few. All the people employed in those in turn pay taxes, which is more money in the government coffers.

Second there are many reports out there that show 2006 was the peak of the recent boom for the O & G sector. Depending on where a company was in the cycle (upstream or downstream) their peak occurred at a different point, some even early 2007; suffice to say though all were on a downward trend by the end of 2007.

There were many factors that led to this. Partly of course it was due to the natural cycle of the industry, all long time Albertans are aware of this. However, there were also a couple of noteworthy external factors that came from government.

From the federal government there was the new tax on Income Trusts brought in late in 2006, having a huge impact on the O & G sector.

From the provincial government that same year Alberta’s SRD introduced a new “Consultation Process”. The result was that it added an incredible expense for O & G businesses.

Also in the fall of 2006 the removal of the ARTC came into effect September 1 and removal of the RCIT January 1, 2007. Each of these reduced the revenue of energy companies.

It is important to realize energy sector companies plan months ahead; typically 9 to 12 months depending on the scope of a project. There were telltale signs that things were on a downswing. The drop in land sales and the price per hectare should have been one hint.

Now Mr. Stelmach was elected head honcho in December of 2006. He had been an MLA since 1993. So unless he was asleep in 2006 or just wasn’t paying attention, he should have already known the industry was slowing. The sector was also making its plans for 2007 based on those government changes that occurred in 2006.

Yet Stelmach forged ahead in 2007 with the Royalty Review and ultimately announced the New Royalty Framework. It was no surprise that at that point the oil and gas sector was saying things like; “This is the final nail in the coffin”, “This is NEP.2”. There was (is) only so much one industry can take before it has to cut its losses and seek a more favorable business climate. It is no wonder that our neighbors, BC and Saskatchewan have benefitted from our governments naiveté.

Stelmach sold the program as Albertans getting their “Fair Share”. Though in reality it would have only put more money in the governments’ pocket. I guess that’s okay if you are comfortable with the governments spending habits. Now of course we know it likely will not produce the promised extra billions, as a bigger percentage of a smaller pie is not always more.

Are we comfortable with the government spending habits? Have Albertans in general even been paying attention? We all remember and some even complain about the spending cuts and program slashing of Klein, but what has happened since then?

Well the chart below from the Canadian Taxpayers Federation (CTF) very clearly shows spending has only gone one direction ---- UP. In fact quite steadily since 02-03 and a bit of spike in 06-07. (Remember head honcho, December 06)
You can click on graph to enlarge it.



Now, it is understandable in some respects as we have grown incredibly over the years. However, should we not expect (or even demand) some restraint when the revenues are not keeping up the expenditures? We certainly would if this was our household budget; we would if this was our businesses income statement.

The CTF also point out some things that, well… seem obvious.

Just as it was a problem to be reliant on debt to fund our overspending in the 1980s and early 90s, it is a problem now to be reliant on a source of revenue that is
a) depleting,
b) dependent on a world price Alberta has no control over, and
c) has proven to be unreliable throughout Alberta’s history.

Another graph from the same report. This one trends the same and again that spike that starts in 06-07.



And the most alarming is the commentary that accompanies this graph.

Alberta’s labour force has grown by 20 percent since 2002e. It stands to reason the number of roadway building and construction companies in Alberta has likely not grown by much more than what the labour force would allow. However, the Alberta government is spending 780 percent more on capital projects in 2008-09 than it spent in 2002-03.

Now back to who is responsible.

I think we all are in some respect, we have allowed this to continue year after year, unchecked. Too many of us believe that government will take care of us, that they will do what is best for us and the province. We believe or at least like to, that the people who run for office really care about their constituents. Sadly though they have, for the most part become too complacent and out of touch with reality.

Stelmach and the other 82 members have a responsibility to all Albertans. They have been asleep at the wheel, they have ignored the independent advice, they have ignored the industry they are hurting the most; it should come as no surprise when they ignore Albertans.

Recently I had an opportunity to have a long chat with a sitting MLA. Surprisingly we had much in common and their stance on most issues was more inline with the Wildrose Alliance Party than the PC’s. I asked why they ran for that party then. The response was because they knew they would be on the winning team.

It’s attitudes like that within the PC party that put all Albertans on the losing side of the game. It is our lives, our livelihoods and our children’s future that they are playing with. Hopefully some of them will wake up, find their moral compass and start to stand up for Albertans.

Links to the CTF report can be found in my original posting.
http://janemorgan.blogspot.com/2009/...o-deficit.html

[longsuffering]

I don't find your post very clear.

Are you suggesting that the Alberta government shouldn't be spending so much money on capital projects? So is it that we don't need to replace old infrastructure or build new infrastructure? Or are you suggesting we should defer that work until the labour market is more favourable? I don't understand what you're saying.

And I love this reference to an anonymous sitting MLA.

Recently I had an opportunity to have a long chat with a sitting MLA. Surprisingly we had much in common and their stance on most issues was more inline with the Wildrose Alliance Party than the PC’s. I asked why they ran for that party then. The response was because they knew they would be on the winning team.

I'm convinced!

[Claeren]

I hate cliched complaints about government salary increases.

I don't like the thought of MLA's making a lot of (my) money any more than most people, but they make less than most of them would make in private industry doing similar work.

Do you want the people elected to represent you to (1) not be making much money compared to the industries/people they are charged with regulating and (2) not representing as many of our best and brightest as possible? If someone can make $500,000 in the Energy Sector as a senior upper mid-level (not even CEO, CFO, etc) executive with many years experience why would they spend a load of money to become an MLA for 4 years for a salary of much less than half that?


Also, I bet most Albertans here have had salary increases at least similar too, if not outright double or triple, what most government jobs have had over the past 5 years??



I know I am biased as I work for the Health Region, but we got 3%/year (often split between 1% in spring and 2% in fall - brutal) for the last 5 years (after big salary cuts and freezes in the 1990's) while all of my friends were getting 10%-100% raises/year, plus stock options, plus company trucks, etc etc. We have a 5% raise this year and next and I already know the government is talking about trying to open dialogue about salary cuts instead. I am not exactly complaining, as I value my job security, but my friends who have kept their jobs are complaining about 10% pay cuts but have received (often) hundreds of thousands in options and bonuses AND have had huge salary increases which means a 10% paycut still leaves them about 90% overpaid. (And I think my point still stands even if someone is not the extreme private sector example, for while my friends tend to be engineers, real estate types, business consultants, financeers, etc private labourers and the like have also enjoyed a pretty good boom in wages)

Meanwhile we 'spoiled overpaid government workers' will probably end up making the same in 2012 as we did in 2004 in absolute dollars (and thus actually making much less after inflation) despite having to do each do the work of 3 people due to constant cuts in the system. We didn't get any boom in wages/benefits during the boom, only the increase in costs, yet we also take heat when times are bad again.

The point is that everyone likes to think they deserve their money but that the other guy doesn't. -- I am pretty sure that there is some balance between wages and who does the job and I am not so sure that just complaining is that constructive. If you think the MLA wage is so high for the work involved why are you not an MLA?





Claeren.

[Bend it like Bourgeois]

Originally Posted by JustAnotherGuy

I think which ever party was in power would probably have pissed away another boom. The people of Alberta demand spending takes place when the province is rich.

I just wish that we get it right before all the oil runs out.

For sure, but the tories were in power and it was their call so they get to take whatever blame the government is due.

They did a horrible job of managing expectations and the books. The 'cuts' of the early 90s were reversed by the mid 90s, but we've been trying to make up for them for 10 years. Yes there was pressure, but the tories not only gave into it but encouraged it.

[First Lady]

Originally Posted by longsuffering

I don't find your post very clear.

Are you suggesting that the Alberta government shouldn't be spending so much money on capital projects? So is it that we don't need to replace old infrastructure or build new infrastructure? Or are you suggesting we should defer that work until the labour market is more favourable? I don't understand what you're saying.

I was illustrating how the spending has massively outpaced the revenue; that the reins should have been pulled in at some point.

Do I have all the answers? No, definitely not. Clearly though they have let every department have runaway spending; without paying attention to the declining revenue.

[longsuffering]

Originally Posted by First Lady

I was illustrating how the spending has massively outpaced the revenue; that the reins should have been pulled in at some point.

Do I have all the answers? No, definitely not. Clearly though they have let every department have runaway spending; without paying attention to the declining revenue.

So does your Party believe that Capital projects should be funded out of current revenues only? No borrowing and building for the future?

If current revenues are such that they can't fund new roads or hospitals, then we don't build them?

[First Lady]

Originally Posted by longsuffering

So does your Party believe that Capital projects should be funded out of current revenues only? No borrowing and building for the future?

If current revenues are such that they can't fund new roads or hospitals, then we don't build them?

I believe in and support balanced budgets. And that might mean some things get *gasp* cut or delayed. Or maybe it means they find more economic ways to accomplish things.

Even the current government supported this. They not only told us, they brought in a law stating they would run balanced budgets.

However what they have been doing is relying on the Royalty surplus year after year to make up the difference of what was lacking in the known and regular revenue.

And now what do they do to correct this imbalance? They propose to change their own law so they can take us into debt and continue their out of control spending.

[RedHot25]

Originally Posted by First Lady

I believe in and support balanced budgets

You would run a balanced budget right now? Not saying good or bad, yay or nay, just curious.

[First Lady]

Originally Posted by RedHot25

You would run a balanced budget right now? Not saying good or bad, yay or nay, just curious.

Yes. Like the CTF I think it is still possible for this coming year.

However, if they do not take steps now it will become increasingly difficult, perhaps even impossible.

It will be very interesting to see what the April budget brings.

[Slava]

Originally Posted by First Lady

I believe in and support balanced budgets. And that might mean some things get *gasp* cut or delayed. Or maybe it means they find more economic ways to accomplish things.

Even the current government supported this. They not only told us, they brought in a law stating they would run balanced budgets.

However what they have been doing is relying on the Royalty surplus year after year to make up the difference of what was lacking in the known and regular revenue.

And now what do they do to correct this imbalance? They propose to change their own law so they can take us into debt and continue their out of control spending.

Not borrowing to pay for long-term capital projects is just plain stupid. I would never attempt to save up to pay cash for a house instead of getting a mortgage, and that is what this is akin to.

I'm definitely not a Stelmach supporter and think that there are a lot of things that they could've done to prevent this, but that list does not include stopping spending for me. It means changing the priorities of where they spend...but that has been my sentiment for a lot of years now.

Anyway, carry on with this thread. I probably should've just pulled the smily of the guy eating popcorn...but the idea of never having debt is just so basically wrong to me that I had to chime in!

[First Lady]

Originally Posted by Slava

...but the idea of never having debt is just so basically wrong to me that I had to chime in!

Well, you are in luck then, because until 2012 (maybe even 2013) we have the goverment that will take us right where you want to be.

[longsuffering]

So if the Wildrose Party had been the formed the first government of Canada, we'd have no National Railroad?

I guess we'd have no Transcanada Highway either. I also wonder about all the publicly funded utility infrastructure from days gone by. No telephone system, no electric grid.

[First Lady]

Originally Posted by longsuffering

So if the Wildrose Party had been the formed the first government of Canada, we'd have no National Railroad?

I guess we'd have no Transcanada Highway either. I also wonder about all the publicly funded utility infrastructure from days gone by. No telephone system, no electric grid.

Damned if I know. I am old, but that old.....

[jammies]

Originally Posted by First Lady

9) Ed increases cabinet size to repay friends for sticking with him, costing Albertans millions.

Leaving aside the rather shaky relation of cause/effect in most of these "Top Ten" points, I have to say that if you're looking to get the press to use these as talking points, they have to be done much more professionally.

"A cabinet that is too large and therefore has too many ministers spending money on inessential services" is a talking point; what you have looks like it was written by some redneck who thinks he's folksy by referring to the Premier as "Ed". Same with most of the rest of them, lose the folksy/rant on the internet feel and go for something that doesn't look like it was created by amateurs.

[Azure]

Originally Posted by longsuffering

So if the Wildrose Party had been the formed the first government of Canada, we'd have no National Railroad?

I guess we'd have no Transcanada Highway either. I also wonder about all the publicly funded utility infrastructure from days gone by. No telephone system, no electric grid.

No, pretty sure that isn't the point.

Price of oil is $45/bbl. You can't keep spending, and basing a budget on $70/bbl.

Pretty simple. Make some cuts, ride out the tough economy, wait for oil to get back to normal. Pretty simple.

[psicodude]

See, this thread is a perfect example of why the PC's win every election without a challenge. All that the opposition parties can do is complain about how much the PC's suck, but they rarely say what they will do to make it better. FirstLady has been asked several times what her party would do to turn the economy around, and her answer was "I don't have all of the answers, but I know Stelmach sucks". Typical.

For the record, I actually think Stelmach is a terrible leader, and not particularily bright. Unfortunately, there is no viable alternative.

[First Lady]

Originally Posted by jammies

Leaving aside the rather shaky relation of cause/effect in most of these "Top Ten" points, I have to say that if you're looking to get the press to use these as talking points, they have to be done much more professionally.

"A cabinet that is too large and therefore has too many ministers spending money on inessential services" is a talking point; what you have looks like it was written by some redneck who thinks he's folksy by referring to the Premier as "Ed". Same with most of the rest of them, lose the folksy/rant on the internet feel and go for something that doesn't look like it was created by amateurs.

The top ten are not a WAP press release. They are a list one of our directors did up as a tongue-in-cheek piece to send to his local paper, which happens to be small-town Alberta. The only press he is hoping for or even likely to get is a "letter to the editor".
Though, I don't know if I would go so far as to say he is redneck.

Our regular releases are completed professiionally by our VP of Communications in conjunction with Paul and appropriate experts. They are often picked up by the MSM.

[First Lady]

Originally Posted by psicodude

See, this thread is a perfect example of why the PC's win every election without a challenge. All that the opposition parties can do is complain about how much the PC's suck, but they rarely say what they will do to make it better. FirstLady has been asked several times what her party would do to turn the economy around, and her answer was "I don't have all of the answers, but I know Stelmach sucks". Typical.

For the record, I actually think Stelmach is a terrible leader, and not particularily bright. Unfortunately, there is no viable alternative.

For the record I have never used the word $uck$.
It is not part of my vocabulary.

As for what we would do; it is well publicized our partys' position is a full reversal of the NRF.

I have also pointed to an excellent document by the CTF; it proposes many fiscally conservative steps that are inline with our parties stance.

[Slava]

Originally Posted by psicodude

See, this thread is a perfect example of why the PC's win every election without a challenge. All that the opposition parties can do is complain about how much the PC's suck, but they rarely say what they will do to make it better. FirstLady has been asked several times what her party would do to turn the economy around, and her answer was "I don't have all of the answers, but I know Stelmach sucks". Typical.

For the record, I actually think Stelmach is a terrible leader, and not particularily bright. Unfortunately, there is no viable alternative.

That is OK. We know enough about what they wouldn't do....that is go into debt. We all know that even responsible debt is against fiscal conservatism and has nothing to with their ideology.

One day even the rampant right-wingers in Alberta will come to understand basic economics though. It might take until all of the oil is gone, but the day will come when they recognize that building major capital projects during the downtimes is the most feasible time. From a pure cost perspective things are cheaper. There are more qualified workers to be had, which is important as well. Finally that hospital or highway that you are building and will use for the next 50 years can also be paid off within the same time frame.