Friday, February 10, 2012

Redford's Budget: Smoke, mirrors, broken promises and prayer.

The 2012 Alberta budget was released yesterday and when I heard Finance Minister Ron Liepert come out and comment on US trillion dollar deficits in one breath while trying to paint the rosiest of pictures on Alberta's economic future the next, as if he had no idea how or why the recession started or why it has taken so long to recover,  I knew that we were in trouble. While the budget may sound good or at least sound better than it has been the last few years, and you can be sure that the PCs spent many hours trying to come up with buzz words and feel good phrases to make it appear that way, it is little more than smoke, mirrors, broken promises and prayer.

Revenue is up to $40.3 billion but unfortunately spending is also going up to $41.1 billion creating a deficit of $886 million. The 5th straight deficit budget in a row from the Progressive Conservatives and one that right off the bat would be $1 billion higher if not for the Harper governments recent decision on health transfer payments that return 1 billion dollars to the Alberta Treasury.That and the PC's have elected NOT to borrow the $1.8 billion this year that they said they would in the 2011 budget. (2.8 billion off the deficit between these 2 things alone!)

Now here is where the smoke and mirrors along with a little prayer comes in. The numbers are all totally based on government projections on the future price of bitumen, oil and natural gas in the highly unpredictable energy market. ( A great but dry blog here from Andrew Leach, second last paragraph a must read) If their crystal ball like numbers are off even a little bit the deficit will climb, and looking at the numbers they are using for natural gas which the US suddenly has a glut of, they are indeed going to be off their estimates. The same can be said for the bitumen estimates while their oil estimates seem more realistic. No one knows for sure just what future prices or economic conditions will be but with the entire budget and their credibility riding on it you can bet that Redford and the PC's are praying that their estimates hold out.

A couple more things on the deficit this year. Why are they running one at all? No, I am not talking about why they are not making cuts to spending, which is entirely a valid point and worthy of discussion, but does it really make sense to you for Redford to increase spending by $1.3 when they could have just increased it $500 million and wiped out the deficit right here and now?  I don't have an answer but I have a few ideas why they may have done so. First off if something goes wrong in the short term during the election and Redford is running on a no deficit budget it would be devastating and possibly an election loser for the PCs; better to go into it with a small deficit and promises of surpluses to follow to reduce expectations. Secondly Redford is trying the tried and true old PC trick of being all things to all people and the only way to do that is not make cuts and increase spending and then they can paint the other parties, or at least the one they are worried about, as the bad guy who wants to make cuts. Lastly, and in my mind the best explanation, is that they are worried that Albertans may wonder how the PC's managed to do it. IMHO the last thing that the PCs want to do is have Albertans take a real good look at how they have been managing the deficit and playing with the numbers by way of going dipping into the sustainability fund.

Which brings me to my next point, broken promises.

Heard that there are no tax increases in Redford's 2012 budget? After all it is what the PC have been telling  isn't it? Well think again. Alberta taxpayers will shell out $1.8 billion in education property taxes to the province, an increase of more than $107 million over the 2011 total.    Interesting number that $107 million; where have I heard it before?  Sure a weird coincidence and even weirder is the promise that the $107 would come out of savings from other departments?

But perhaps the biggest broken promise is the one that most people have already forgotten about and by the looks of it so has Redford. Here is what Alison Redford said: "Reducing our dependence on non-renewable resource revenue will be one of my major goals. The first $6 billion we amass from resources annually will go to cover government operating costs in areas like public services. I will split any additional revenues up to $4 billion between the Sustainability Fund and the Heritage Trust Fund."    

A promise which is now impossible to achieve because there is not exactly an extra $4 billion dollars lying around and there won't be until 2014-2015 and that is only if the PC's crystal ball on energy revenue is accurate and the prediction of a $5 billion dollar surplus actually materializes. The fact that they are predicting a surplus in 14-15 shows that there is NO way that they are planning to put $4 billion dollars into the Sustainability Fund because if they were it would have to be a predicted $1 billion surplus rather than 5. Either that or the surplus is really going to be over $9 billion and the money for the fund has been figured in but if you believe that I have a bridge for sale with your name on it. The truth is that Redford has totally abandoned one of her major promises from the leadership campaign. Not the first time either.

And speaking of the Sustainability fund that will not get the above mentioned promised 4 billion:
In 2009 The Sustainability Fund was worth 17 billion dollars and four years and four consecutive deficit PC budgets later it now sits at $3.7 billion. That is 13 billion dollars gone in less than 3 yrs to cover deficit spending by the PCs.

 I can't remember where I read it but someone asked a great question about the Sustainability Fund: What happens if the budget is wrong and the sustainability fund hits zero?  Not at all out of the range of possibilities and if the PC record is anything to go by it may be even probable. Something to think about.

 Remember, this is the very same group of PC MLAs who promised that by yesterday, budget day 2012, Alberta would be "back in the black" and the government would be running surpluses.

Soon the PCs will be asking Albertans to vote for them and again they will be promising that this time, unlike all of the other times, that it is going to be different. But honestly, why should we trust them again?

As they say fool me once, shame on you, fool me twice shame on me.

I know I am not going to let them fool me again.  How about you?

Updated: 2 National Post articles on the budget

As Ontario sinks, Alberta picks up the baton of bad government.

Alberta's first NDP budget.

November 2012 Update: Looks like everyone but Redford was right. Alberta to go back into debt.


Robert G. Harvie said...

Good post AA..

I borrowed your comment on the sustainability fund for my own post today.

As stupid and frightening as this is, the average Albertan keeps drinking the kool-aid.

Because until this province turns into the next Greece, everyone will keep ignoring the reality of unrestrained spending, and worry about tomorrow, well.. tomorrow.

Ardvark said...

Thank you and borrow away.

The more Albertans see the truth the less likely that they are to swallow that kool-aid.

Blame Crash said...

Deficits are Tax Increases that have been punted into the future.
And with interest!

centerguy said...

Wow being from Ontario having a lefty foothold in Alberta scares me. I am speaking from experience you must stop this now!

Anonymous said...

Budget was very cleverly contrived - very difficult for the WRA to raise objections to it. As Danielle Smith said - Alison Wonderland. I'm still perplexed why Alberta is running a deficit - however small in the midst of plenty.

wilson said...

Wildrose presented an alternative budget today,

”..a modest $16-million budget surplus in 2012-2013 instead of the $3.1-billion cash deficit the PC government posted yesterday
[reported $886 million deficit plus $2.2 billion capital deficit – Page 8, Fiscal Plan]. ”

-An across-the-board public sector wage freeze
- $114 million for 1,425 more teachers
- $80 million for 1,000 more health workers, technicians and support staff
- $50 million for 1,000 more seniors care support workers
- $53 million for 300 more police officers, including 5 dedicated checkstop teams

(re/post bly)

Anonymous said...

Good article, well wrote, and great facts. I almost think our Government has a hidden agenda to deplete all our savings and make us more vulnerable to the changes taking place in the "new world order".