Deficit spending during economic slump unavoidable

Both the NDP and the Wildrose agree that deficit spending to get through an economic slump is necessary to get back on track, say officials.

“The Wildrose even ran in the 2015 campaign recognizing that we would have to have a couple of years of deficit to get us back on track,” said Jason Nixon, Rimbey-Rocky Mountain House-Sundre Wildrose MLA and shadow minister for democracy and accountability, during a phone interview with the Gazette.

However, Alberta's government and the official Opposition tend to disagree in terms of how much to borrow.

Although the Wildrose recognized it would take some time to readjust government spending to get out of the red, the party would not have pushed the same amount of deficit recently announced by the finance minister, he said.

Following the prolonged downturn in the price of oil, which has been stagnating above $30 per barrel with no quick end in sight, the NDP recently announced its originally forecast deficit of about $5 billion would jump to more than $10 billion for 2015-16.

In 2014-15, oil royalty revenues were shy of $9 billion. In 2015-16, they are projected to be down to less than $3 billion — a drop of more than $6 billion that has directly impacted the bottom line, Joe Ceci, finance minister, told the Gazette during a phone interview.

“Our deficit is directly attributable to all that,” said Ceci.

The government has had to run a deficit to maintain its operations and provide the services Albertans need, including health care and education, he said.

“Those important services need to be adequately funded,” he said. “We don't want to make a bad situation even worse by laying off people in those areas.”

Although the Wildrose advocates finding room to tighten the government's fiscal belt — namely in Edmonton's “bloated bureaucracy” — the party agrees front-line service positions must remain, said Nixon.

“We put forward a billion dollars of savings in the last campaign that would not have touched front-line services at all,” said Nixon.

But by not taking adequate steps to rein in Alberta's “spending problem”, the province's debt will continue to skyrocket with a corresponding risk of credit downgrades. The government should ensure it doesn't make cuts in the wrong areas, but it needs to get spending under control because borrowing can't go on forever, he said.

Services are part of the bedrock that provides a stable foundation, and they are needed for the province to run. Nevertheless, “there are efficiencies that are to be found in the government, and that has to be done the right way,” he said.

However, maintaining a certain level of services is only a part of the equation. The province must also invest in infrastructure, Ceci said.

“We have a rather significant infrastructure investment plan of $34.5 billion over five years,” said Ceci.

Funnelling funds into infrastructure throughout the province — roads, bridges, schools and hospitals to name a few — keeps Albertans employed and also allows for more rapid growth by preparing the province for when the economy bounces back, he said.

That's a point on which Wildrose also agrees, and the party campaigned in part on the importance of providing proper infrastructure funding for Alberta's municipalities, said Nixon.

“We see a need for infrastructure spending,” said Nixon.

In the fiscal year before the NDP was elected, Alberta had its third highest revenue in about 100 years and the former PC government still ran a deficit, he said.

“What did we get for that $100 barrel of oil?” he said.

Any government in office should be steadily investing in infrastructure for communities based on a prioritized system that is apolitical, and funding for infrastructure should not be used as a political tool to buy votes in certain areas. Communities also need more stability to know what kind of funding will be available from one year to the next, he said.

“We've got infrastructure problems, there's no doubt about it. So let's get to work,” he said.

Unemployment, which is at its highest rate since the 1980s, is another big issue facing Albertans, and the government should also be focused on helping people find jobs, he said.

In terms of cutting costs, the government has been looking at ways to reduce spending and ensure revenue is spent wisely. The NDP reviewed the remuneration and salaries of MLAs as well as political staff, and asked for a freeze during the length of the government's term, which was agreed to, Ceci said.

Additionally, the NDP further reduced spending by about half a billion dollars through pushing out payments for carbon capture and storage as well as savings in agriculture, where crop insurance payouts were not as high as expected, he said.

All that being said, “It would be great if the revenue side of our ledger improved.”

The price of oil per barrel is not about to suddenly jump back up, and industry members, economists and other experts the government has consulted with say the low price is a new normal, he said.

The government even recently reviewed its own numbers for the third quarter of 2015-16 that had forecast oil at $50 a barrel and revised that figure to $45 a barrel. Although the price per barrel sits at about $33, it was at about $63 when the NDP took office last May, so the revised amount represents an average, he said.

“Those were good days. And we'll get to better days again. We're going to pull through this,” said Ceci.