The Redford government has finally made official what financial experts and the Wildrose Party have repeatedly warned – Alberta is going back into debt.
During and prior to the election, the PCs made a clear promise they would balance the budget by 2013 without raising taxes and without a return to debt financing. Their now infamous “Alice in Wonderland” pre-election budget predicting double-digit revenue increases, $100+ per barrel oil prices and massive new spending initiatives was widely discredited throughout the campaign, yet they continued to commit to their balanced budget pledge.
And now that the election is over, looks like the joke is on us!
In an interview last week, when asked whether the government would keep its promise to balance the budget by 2013, Associate Finance Minister Kyle Fawcett said, “What we are committing to is balancing the operating budget.”
What Mr. Fawcett failed to mention is that the ‘operating budget’ has been balanced since 1994 during the early Klein years, and does not include any provincial infrastructure spending which this year amounted to $5.7 billion.
Claiming a budget is balanced if you only include operating expenses is like a family saying they have a balanced budget as long as they don’t include their mortgage and car payments. It’s absurd, but the PCs made an election promise they intend to keep… even if it means altering the definition of what a balanced budget is!
A day later, several media outlets reported on how Premier Redford and her Finance Minister, Doug Horner, plan to “balance” their budget.
Two words. Debt Financing.
The plan is to use P3s and other debt financing tools to spread or amortize the costs of tens of billions in new infrastructure spending over many decades thereby only having to declare about 1/25th to as low as 1/50th of the actual cost of new infrastructure on the province’s books in any given year. This will allow them to continue to spend like Don Getty on steroids while claiming that their “operating budget” is balanced. For example, they could spend 10 times more ($57 billion) than the $5.7 billion they spend today on infrastructure, yet it would show up on the balance sheet as only a few hundred million in debt servicing expenses each year.
In other words – the deficit will read 0, even though ‘liabilities’ (debt) on the provincial balance sheet will skyrocket.
The PCs love to point out that businesses and families borrow for infrastructure so why shouldn’t the government? Well for one, unlike a family with a home mortgage or a business borrowing cash for a factory, government “assets” can almost never be sold and cost millions to maintain. And second, because unlike normal mortgages and business loans, we don’t ask our kids and grandkids to make our mortgage and loan payments for us when we retire.
As we have seen in the United States, Spain, Greece and many other parts of the world, governments that pursue this course of fiscal madness end up bankrupting their people, enslaving their children to debt, increasing taxes, slashing core social spending and bulldozing their economy.
Alberta was once a province that committed itself to managing its extraordinary wealth in a way that would benefit future generations forever. Premier Lougheed created the Heritage Fund for that purpose. Premier Klein led us through painful cuts through the ‘90s in order to overcome the selfish spending habits of the Getty years.
And what have Premier Redford and the PCs done with these legacies over the past five years?
The Heritage Fund is worth less than it was in 1976. The ‘Rainy Day’ savings fund that Ralph saved is all but gone.
And now Alison Redford is plunging our province, our children and likely our children’s children back into debt despite oil prices at all-time highs
It is wrong, it is immoral, it is not what was promised during the election, and Albertans need to put a stop to it before it’s too late.
