Alberta budget news

[Jacks]

Thanks for the info bizaro86. I'm still not seeing how this differs from when prices, and the differential in prices, has gone up and down according to the historical data over the last 5 or so years. Both the Baytex and Cenovus numbers show things have been worse in the recent past. The difference now seems to be that our spending has increased a lot.

[Tinordi]

Another way to avoid these budget shortfalls, start hedging:

http://www.reuters.com/article/2013/...0AYHVI20130129

CALGARY, Alberta, Jan 29 (Reuters) - A prominent economist recommended on Monday that Canada's provinces consider hedging their exposure to volatile energy prices, less than a week after Alberta's premier warned of a C$6 billion ($5.98 billion) budget shortfall because of deeply discounted Canadian oil prices.

Avery Shenfeld, chief economist at CIBC World Markets, said Canada's provinces should consider locking in oil prices to provide some certainty to budgets that can be thrown out of whack by commodity swings.

"Provincial finance ministers are now acutely aware that a bountiful surplus can turn into a gaping deficit in a hurry when commodity prices slip," Shenfeld wrote in a research report.

[mykalberta]

Originally Posted by Tinordi

Good article:

http://www.irpp.org/po/archive/may11/emery.pdf

So their solution would be to raise our tax levels to the same as Norways to pay of budgetary items.

Norway total taxation as a percentage of GDP = 43.6
Canada = 32.2

So for Alberta to get to a normalized percentage of taxation to GDP our tax rates would likely need to more than double.

While I do think that getting rid of the 10% flat tax is a must. I would prefer a mix of increased revenue and decreased spending vs only increased revenue.

Publicly funded services should only be looked on as a service when necessary and not one that needs as convenient as a service you would get from the private sector. To think that you should get the same service for no extra payment is crazyness.

I do agree, resource revenues should not be used to pay for yearly budgetary items. Only 1 time costs such as infrastructure etc.

[GP_Matt]

Originally Posted by Slava

No. Its called magic.

Also, prepare for the Wildrosers here to crucify you. They don't like when you ask what they could do differently or talk about their policies. (for the most part)

I think the difference is that during the election three parties were saying that we were in trouble and one party was saying that the future was rosy. The Wildrose said we had a spending problem and the Lib's/NDP figured it was a revenue problem. The PC's continually stated that there was no problem. I think the three other parties would have been trying to fix the problem 9 months ago. It definitely wouldn't have been easy and they wouldn't likely be showing results yet but we could be on the right path.

It took years for the PC's to get us in this situation and other than a resource boom it will take a while to get out of it.

[Slava]

Originally Posted by GP_Matt

I think the difference is that during the election three parties were saying that we were in trouble and one party was saying that the future was rosy. The Wildrose said we had a spending problem and the Lib's/NDP figured it was a revenue problem. The PC's continually stated that there was no problem. I think the three other parties would have been trying to fix the problem 9 months ago. It definitely wouldn't have been easy and they wouldn't likely be showing results yet but we could be on the right path.

It took years for the PC's to get us in this situation and other than a resource boom it will take a while to get out of it.

While that's fair, the reality is the one party that said "spending problem" also gave no concrete examples of where they were feasibly save the money either. In all honesty, we'd be in the exact same position right now if the polls had held and the Wildrose pulled off the upset. They were just as reliant on fossil fuel revenue and couldn't cut enough spending to balance the budget. It's the same reason we don't hear anything concrete from them today though because it's not a simple solution.

[GP_Matt]

I think they would have made some positive steps already though. As one example, the $500 million that you have said could be curbed from the CCS fund.
I also think that they will be in a better position to negotiate with departments over cuts. The PC's have been in power for so long that they are effectively one and the same with the bureaucracy.

[Azure]

How much additional revenue would increasing the flat tax rate to 15% raise? I can't find any numbers as to what the tax revenue is to do the math.

[chemgear]

Originally Posted by Azure

How much additional revenue would increasing the flat tax rate to 15% raise? I can't find any numbers as to what the tax revenue is to do the math.

I'd be interested as well. However, here is apparently the difference if we were to move to what the other provinces tax relatively speaking:

[Tinordi]

Relevant, Jeffrey Simpson:

http://www.theglobeandmail.com/comme...rticle7975889/

Filling the gap between the low taxes and munificent services are revenues from oil and natural gas. These revenues account on average for 30 per cent of Alberta’s budget. These revenues fluctuate with world prices, North American energy markets and other factors beyond the province’s control. Unsteady prices lie at the heart of the “boom and bust” plague of Alberta’s economy – and its budget.

Albertans ought to know in their bones about “boom and bust.” They’ve lived it before. But their governments don’t do anything about it, in large part because they’re creatures of a political culture in which citizens enjoy the fairyland of low taxes and large government.

When times were good and non-renewable resource revenues were buoyant, Alberta governments systematically refused to plow into the Heritage Fund. As a result, the fund contains a piddling amount relative to what it could have become. The province built a Sustainability Fund to cover downturns in revenues, but that’s shrivelling.

Once again, the prices for Alberta’s non-renewable resources are dropping. Natural gas prices are very low and will stay there courtesy of new supplies. A glut of North American oil (so much for the End of Oil folly) means Alberta’s bitumen oil has to be sold at a huge discount, costing the province billions of dollars.

What Alberta needs is a steadier source of revenue to fund its basic government services – namely, a provincial sales tax of the kind found everywhere else in Canada. With such a tax, Alberta’s revenues would be much more stable, and more money from non-renewable resources could be placed into the Heritage Fund.

Asked whether he thought a sales tax was necessary, a former Alberta finance minister laughed off the idea with a political reaction: “They’d hang me from a lamppost.” He was certainly correct, given the province’s political culture. Even today, with the same unheeded lesson about volatile revenues from non-renewable resources again plaguing the province, Premier Alison Redford says: “It is not good enough to take the easy way out and raise taxes.”

So how about other easy ways out? Like borrowing more money to fill deficit holes. Or fooling people by saying that finding “efficiencies” in government services can fill gaps of billions of dollars. Or make-believe stories of the kind the Premier is peddling – that more money can go into the Heritage Fund without higher taxes, yet with more investment in the two biggest items in the provincial budget: health care and education. This is the easy way out of problems: Avoid them.

[Tinordi]

Another key point is that spending resource revenue is just another tax just in a different form. The opportunity cost of that resource revenue spent is real value for Albertans. Simply fooling yourself into thinking that Alberta has the lowest tax rates ignores the fact that resource revenues are a significant share of provincial wealth that all Albertans own.

[Tinordi]

Anyway, I'm harping on this point because I completely agree with Jeffrey Simpson, we need to start changing the political culture around here. And this board is as good a place to start than any. We need to erase this fantasy that "efficiencies" and "waste" are the key to getting us out of this mess. Sure government can be more efficient but no where near to the tune of the amount required. We need to start paying for what we consuming, bottom line. It's the conservative and responsible thing to do.

[Rathji]

Originally Posted by Tinordi

Anyway, I'm harping on this point because I completely agree with Jeffrey Simpson, we need to start changing the political culture around here. And this board is as good a place to start than any. We need to erase this fantasy that "efficiencies" and "waste" are the key to getting us out of this mess. Sure government can be more efficient but no where near to the tune of the amount required. We need to start paying for what we consuming, bottom line. It's the conservative and responsible thing to do.

I agree, except that I strongly think that dealing with "efficiencies" and "waste" cutting needs to be done so that the increased funds from taxation are not just thrown away.

There is a lot truth to the spending problems that exist in some areas, but it is insane to think that fixing those problems will get us more than 10-20% of the way to a balanced budget.

[Tinordi]

There's also very good arguments that the efficiency, waste pursuits and their solutions of "getting government to be more like business" have seriously hampered the effectiveness of the civil service. It's not like pursuing waste and efficiency has no tradeoffs, it does and could server to ultimately undermine cost savings.

[Azure]

Originally Posted by Tinordi

There's also very good arguments that the efficiency, waste pursuits and their solutions of "getting government to be more like business" have seriously hampered the effectiveness of the civil service. It's not like pursuing waste and efficiency has no tradeoffs, it does and could server to ultimately undermine cost savings.

Considering reports have shown that Alberta isn't getting the most bang for its buck on the biggest expenditure in the budget, I sure as hell hope there is a comprehensive review done to improve the efficiency of the system rather than just raising taxes and throwing MORE money at it.

I agree that making up for low tax rates with resource revenue isn't a good idea at all, but I also think that Alberta has the resources AND money to create the absolute best health care system in Canada.

As for the sales tax, I would start with 3%, and up the income tax rate to 12%.

See what happens.

[crazy_eoj]

Originally Posted by Tinordi

There's also very good arguments that the efficiency, waste pursuits and their solutions of "getting government to be more like business" have seriously hampered the effectiveness of the civil service. It's not like pursuing waste and efficiency has no tradeoffs, it does and could server to ultimately undermine cost savings.

There's also clear evidence that many other jurisdictions are able to deliver better outcomes for public dollars while spending considerably less.

This illusion that spending somehow magically fixes all problems needs to end immediately. Quite likely it is exactly how we got into this problem. Long waits in emergence? Well let's raise royalties. Not enough schools? Clearly we should raid the heritage trust fund. Billion dollar deficits? How about a sales tax.

Time to explore some real change in our systems, such as the Wildrose party suggests.

[Jacks]

If any of you have actually dealt with the workings of government departments you'd probably see that if there is a hard/expensive way to do things they will find it. Most of the actual workers are good people but they have to deal with so much bureaucratic BS and regulations that they just give up trying to fix things.

[Azure]

Originally Posted by Jacks

If any of you have actually dealt with the workings of government departments you'd probably see that if there is a hard/expensive way to do things they will find it. Most of the actual workers are good people but they have to deal with so much bureaucratic BS and regulations that they just give up trying to fix things.

This.

We deal with Manitoba Housing on a regular basis, and they have some of the dumbest regulations and requirements out there.

All at the cost of more money from the Manitoba taxpayers.

[Slava]

This should be good. www.budgetchoice.ca where you can run your own budget.

I ended up with a 3.5b surplus, with a 5% sales tax. Combine that with a blog post I made today saying we should be putting $3.5b away for our future and I feel pretty good about myself! I based mine on $65/barrel for pool and made only one cut across seniors, education and healthcare....to doctors pay.

[Plett25]

Using WCS at this week's price and a 5% provincial sales tax, you get a $200 million surplus.

Even with a 10% HST, Alberta would still have the lowest tax rates in the country.

And if WCS goes back to where it was, $5.1 billion goes into the Heritage Fund.

[Tinordi]

There are systemic reasons for this but one of the key things is that government is not business and the considerations of what is value for money is very opaque in government. What is the briefing note to the minister worth? How do you protect value for taxpayers without having sometimes onerous requirements for public procurement. We like to deride government red tape and some of the time that's totally valid, but the main reason why government is inflexible and weighty is in many cases a response to taxpayer demands.

Is government pareto optimal? No. But often there are good reasons that taxpayers place on it that make it less nimble.