By Patrick O’Brien (AIMS on Campus Student Fellow)
As we enter 2018 many Albertans will be watching for Premier Rachel Notley’s budget plan and the details regarding how it will be balanced in five years’ time. Currently the deficit for end of 2017 Is $10.3 billion, and projected to spike to $42.7 billion in the spring of 2018. As the biggest Oil producing province in Canada, Alberta was severely impacted by the crash in oil prices that began in midyear 2014. Large Oil producers competing in the Industry had to adapt to the steep decrease in prices, by cutting costs to half of what they were when WTI oil prices were roughly $100 dollars per barrel. This event caused many Albertans, and many people from the Maritimes who work in the oil fields to lose the
What are some of the problems that the current administration faces when trying to balance the budget? Low taxes, and high government spending. As United Conservative Party leader Jason Kennedy points out, when comparing Alberta to British Columbia, they spend roughly $2700 more per person, and collect $1300 less tax per person. Looking back at the 2017 Budget Plan, it outlines spending for education, job growth creation through subsidies, and healthcare spending, which total roughly $66 billion. On the other hand, cost cutting seems to be very low with a total less than $1 billion dollar, coming from reducing compensation for Provincial CEO’s, combining/reducing agencies, freezing salaries from Alberta Public Services, and renegotiating employment agreements with Alberta Doctor’s which will save an estimate $400 million.
As noted in the budget highlights for 2017, reducing the deficit will not come from cutting operating costs for the Province alone. New sources of revenue generation from oil projects such as Trans Pacific Partnership agreement, and Line 3 Replacement Program will be the main drivers of debt reduction. With the TPP agreement it will promote increased trade international through reduction of tariffs on exported products. The Line 3 Replacement Program will create jobs in Alberta through the construction of the 1031-mile pipeline that will run through the U.S-Canada border. Not only will this create construction jobs throughout Alberta, it will also create a new entry point for Canadian Crude oil to refinery markets in Chicago, U.S Golf Coasts and throughout Eastern U.S.
Business creation and diversification will be the next big strategic decision to lower the deficit. Through competitive tax credits, and second lowest small business tax rate in Canada at two percent. The province is also offering $500 million in royalty credits for the Petrochemical Diversification Program which will be supporting over $6 billion in private investment in Alberta.
Overall Alberta will be taking a different approach than many other provinces, as majority of their revenue will be generated through investments, leading to job creation and growth. Personal and Business tax rates are very low compared to other provinces, and tax credits for investment, and rebates, such as the carbon tax credit will be an attractive reason for individuals and businesses to relocate in the area. Through these tactics, aggressive oil production, and job creation, there stands a chance to rebalance the budget in 2023.