Alberta is experiencing its weakest recovery from recession in the province's history, but the UCP government says the economy is showing some positive signs going into 2020 and oil and gas investment could finally turn a corner.
The provincial government released its 2020 budget Thursday. The budget outlines a $6.8-billion deficit for the 2020-21 fiscal year, shrinking to $2.7 billion next year and giving way to a $700-million surplus in 2022-23.
While the 2019 budget saw deep cuts to some provincial departments, 2020 holds the line on spending for most ministries.
Finance Minister Travis Toews said cutting across the board would have made his job easier but wasn't in the best interests of Albertans.
“Quite frankly, that would have created additional hardship for Albertans that we wanted to avoid if at all possible, and that's why we took an awful lot of time over the summer and fall and in fact have re-evaluated our plan now to really bring a surgical approach to spending reduction in this province,” he said.
Morinville-St. Albert MLA Dale Nally said the budget they put forward was about creating jobs and finding a way back to balance.
“We have said all along that we were to balance the budget at the end of four years and we also said that we're going to do it without impacting the most vulnerable,” Nally said.
Spending for social service programs is being maintained or increased by the provincial government but St. Albert NDP MLA Marie Renaud, who serves as the opposition critic for community and social services, said the funding will not be increasing to match population growth.
Renaud said to effectively fund social programs like Assured Income for the Severely Handicapped (AISH) and Persons with Developmental Disabilities (PDD), they need to be funded at a growth rate of 4.5 to 5 per cent. She worries not accounting for an increase in people who are on these programs will mean the province will have to review its eligibility criteria.
“This is going to be about eligibility again,” Renaud said.The Ministry of Community and Social Services spending will be maintained over the next three years at $3.9 billion, the same as the 2019-20 budget. Last year, spending came in lower than predicted by $63 million due to changes to payment dates for AISH, Employment and Income Support payments.
Funding for AISH will increase from $1.21 billion in 2019-20 to $1.29 billion in 2020-21. Funding for Employment and Income Support dropped from $981 million last year to $936 million for 2020-21. It will further drop to $844 million in 2021-22 and to $749 million in 2022-23.
“We will not know exactly what in terms of eligibility has changed, but clearly, their goal is they've set some really significant targets to get more people off these benefits,” Renaud said.
Nally said he expects the amount of people on Employment and Income Support to drop as the economy recovers and people get back to work.
Budget 2020 notes spending increases in the ministry has outpaced population and growth, with caseload being the key driver. The ministry is responsible for spending on AISH, Family Support for Children with Disabilities (FSCD) and Persons with Developmental Disabilities (PDD). The ministry is undertaking a full review of its programs to make “fiscally responsible changes.”
Economic outlook
Provincial revenues for 2020 are estimated at $50 billion, rising to $54 billion next year and $58.1 billion the following year. Meanwhile, taxpayer-supported debt is expected to hit $76.9 billion this year, $82.9 billion next year and $87.8 billion in 2022-23.
Toews said he's optimistic about 2020 and described the projections as “credible but cautious.”
“In spite of the fact that we are projecting an increase in revenues ... we are not predicting a boom time in the next two years,” he said.
GDP growth that nearly flatlined in 2019 should give way to 2.5 per cent growth in 2020, according to the budget – a forecast that is higher than private forecasts. The government is banking on Line 3 coming online in 2021, providing more pipeline capacity and allowing higher oil production. Either TransMountain or Keystone will need to be built in order for the projected revenues to materialize.
The budget is based on WTI oil prices of $58 this year, and the province expects to add 170,000 barrels per day to its production this year. WTI reached nearly $64 in January but at press time Friday prices were below $50.
It also expects oil and gas investment to turn around in 2020, although investment will still be far below 2014 levels.
Some of that investment includes previously announced investments such as the $3.5-billion Heartland Petrochemical Plant and a $4.5-billion polypropylene plant in Sturgeon County.
Morinville-St. Albert MLA Dale Nally said he is very proud of the budget his government put together and noted they only cut the budget by 2.9 per cent, which was due to declining costs of ending the crude-by-rail program.
“We feel very good that we are actually ahead of schedule on our path to balance based on the third-quarter results. We're over $1 billion ahead of schedule. So I feel really good about that because not balancing the budget at the end of our term is not an option because that's what we campaigned on,” Nally said.
'Gradual' job growth
While Alberta's unemployment rate remains above seven per cent, the UCP government expects it to fall gradually to 5.1 per cent by 2023.
Toews said the unemployment rate remains “stubbornly high” and the government will be putting “even a finer focus on job creation going forward.”
“We will continue to take a broad-based approach, ensuring we have the most competitive business environment possible, because we know this: that it's really the private sector, it's individuals and businesses, that invest in the province and create long-term job opportunities for Albertans,” he said.
Toews said he is confident the unemployment rate will gradually decline as additional investment materializes.
The government's employment projections are an outlier, however. The Conference Board of Canada projects Alberta's unemployment rate to rise next year and then hover around 7.7 per cent by 2023, while Stokes Economics predicts a rate of 5.9 per cent by 2023.
The government predicts the unemployment rate to average six per cent next year, a prediction matched only by the Royal Bank of Canada. Eight other private forecasts put Alberta's rate next year at between 6.4 and eight per cent.
However, Toews said he has confidence in the government's numbers and pointed to the government's track record of accurate economic predictions.
New taxes
The province is introducing two new taxes in 2020. The first is a 20-per-cent tax on vaping products, which the province expects will generate $4 million this year and $8 million next year.
The second is a four-per-cent tourism levy on AirBnBs and other online homesharing sites. The levy already applies to hotels and motels, and the province expects the extension of that levy to bring in $3 million this year and $4 million next year.
Health
As part of what Toews called a “surgical approach to spending reduction,” the province plans to bolster capacity in Alberta's rural hospitals while providing more surgeries in independent and private clinics to reduce surgical wait times without increasing health spending.
The government plans to maintain operational spending for health through 2023, spending $21.6 billion dollars in 2021. That represents a $5-million increase over what was budgeted for 2019-20 but $212 million less than what is forecast to actually have been spent that year.
“We are maintaining health care funding in this province, but more than that, we are looking to improve the way health care is delivered,” Toews said.
Orissa Shima, president of the United Nurses of Alberta (UNA) Local 85 Sturgeon Hospital branch, said maintaining funding without increasing for inflation is effectively a cut.
“When you do not fund to account for inflation and population growth, it is a cut. We have enough challenges meeting our patient care needs on the front line right now,” Shima said.
“I am worried for seniors. If they can’t access proper primary care, or be able to afford medications, they will end up coming to hospital more often and be sicker when they come in.”
Health spending makes up about 40 per cent of the province's total budget.
The provincial government hopes to squeeze more value out of the health budget after reports suggested Albertans are paying more than comparable provinces while getting less.
Last year's Blue Ribbon Panel on Alberta's Finances found Alberta was spending $5,077 per capita on health while British Columbia, Quebec and Ontario spent an average of $4,239, “and we're not getting better results,” Toews said.
A review of Alberta's health care system conducted by Ernst & Young, released Feb. 3, identified a number of long-term savings initiatives that can potentially save between $1.5 and 1.9 billion annually. Alberta Health Services is expected to present a long-term implementation plan on how to meet these goals ton May 13.
“For every efficiency and for every cost saving achieved, those dollars stay in our health care system. Those funds will go to front-line health care delivery in this province,” Toews said.
According to Alberta Health Services, there are approximately 70,000 Albertans waiting for surgery, half waiting longer than clinically recommended targets.
To help address this, the provincial government has earmarked $100 million over three years for the Alberta Surgical Initiative in Budget 2020, hoping to reduce wait times for surgery by funding an additional 80,000 surgeries by 2022-23.
Alberta Surgical Initiative funds will be used to open new operating rooms, renovate existing spaces and purchase new medical equipment.
As many as 18,000 more surgeries could be performed in Alberta every year if operating rooms were utilized more effectively, according to the Ernst & Young review. The report estimates Alberta's operating rooms currently operate at about 70 per cent of their total capacity.
Additional surgeries could be performed by expanding the use of publicly funded independent operating facilities outside of hospitals.
Around 40,300 publicly funded surgeries were performed in independent and private operating rooms in 2018-19, representing about 15 per cent of all such surgeries that year.
The government's plan would see the number of publicly funded surgeries in non-hospital settings increase to 30 per cent by 2023, with the Ernst & Young report estimating such surgeries can cost between 15 and 33 per cent less than when they are conducted in hospitals.
As part of building overall system capacity, Budget 2020 also earmarks $35 million over three years for a new Rural Health Facilities Revitalization program, which is designed to upgrade medical infrastructure in rural Alberta.
The budget also includes $25 million over three years for the Red Deer Regional Hospital Renewal Project and $137 million by 2030 for Calgary's Peter Lougheed Centre emergency department, mental health intensive care unit and laboratory redevelopment projects.
The provincial government plans to make up the cost of these initiatives through finding efficiencies in the health system. This includes a plan to reduce spending on public sector staffing costs by 7.7 per cent – said to be made mostly by attrition and closing already vacant positions – as well as renegotiating physician fees, outlined as one of the three largest operational health expenses in Alberta.
– With files from Claire Theobald, Local Journalism Initiative reporter.
