On August 26, 2008, Finance Minister Iris Evans announced that the Government of Alberta was headed to a $8.5 Billion surplus. "It's clear that our economic outlook continues to be bright," Evans was then quoted.
On August 26, 2009, it is expected that the Government of Alberta will announce a $6.9 to $8 billion deficit. That is a $16 billion dollar difference in one year.
Once considered to be the land of endless money and honey, Toronto-style bragging rights included, Albertans have now found their government back in a place that our political leaders swore they would never take us. But as development of our bitumen-glazed energy beach has slowed to a more manageable pace and natural gas prices have dropped, is it fair to criticize a one or five year deficit in a province that has in many ways become a rentier state?
Personally, it is not so much the existence of a deficit that I have a problem with, as much as it is the sloppy political decisions that led us here. This won’t be a surprise to regular readers, but I sincerely believe that mediocre leadership from each end of the political spectrum is holding Alberta back. There are a lot of smart people in Alberta, so it's not as if there was a lack of warning to the Alberta Government to save while the boom was hot.
I don't usually like to be the person who says ‘I told you so,’ but in this case I’m going to take a bit of guilty pleasure out of it. For years, many of my PC-supporting friends would tell me again and again that because of the Fiscal Responsibility Act, Alberta was forever protected from future deficits. “Dave, you silly lefty,” they would tell me, “deficits are illegal in Alberta. Period.” I would of course respond with “it’s nothing a quick legislative amendment can’t change,” and we’d quickly go back to drinking our beer. Minister Evans introduced amendments to the Fiscal Responsibility Act in April 2009.
Aside from a significant downturn in resource revenue, our provincial leaders haven’t exactly been diligent in the area of smart planning. The lost revenue from the cancellation of approximately $1 billion dollars in Health Care Premiums and the 5-month long Alcohol Tax, as well as the continued support of the Carbon Capture Scheme (CCS), are the kind of decisions that have and will continue to contribute to the loss of billions of dollars of revenue.
As I wrote in my review of the 2009 Alberta Budget, before politicians and pundits begin talking about slashing spending and cutting services, let's please keep some perspective on economic growth:
Alberta's economy has depended on revenue from cyclically priced resource commodities for decades and has seen much worse economic times. After years of unsustainable growth, no one should be surprised that Alberta's economy has slowed down and now is facing a 1.8% contraction. With +$50 barrels of oil and 2% projected economic growth next year, Alberta is in a much better position than it was during previous economic recession. Let's please try to keep some historical perspective in mind when we're talking about these tough economic times.Graham Thomson has an excellent column about Alberta’s record high deficit in today’s Edmonton Journal that should be recommended reading for those wanting more insight into Alberta’s fiscal situation.