EDMONTON (660 NEWS) — After an extremely tough year that has crippled Alberta’s finances and caused widespread hardship, the provincial government is out with a new budget that aims to spark recovery.
“Protecting Lives and Livelihoods” is the title of the 2021-22 fiscal plan announced on Thursday in Edmonton, including massive investments in health care and sectors that could recover thousands of jobs.
WATCH: Finance Minister Travis Toews delivers 2021-22 Alberta budget
The COVID-19 pandemic is the largest culprit to the myriad of issues experienced around the province since the previous budget was released last February, as losses were far greater than expected even though the United Conservative Party did project some slower than normal growth for 2020.
“Budget 2021 was developed in response to our challenges. It’s a plan that will see Alberta past its current crisis by focusing on what matters most,” said Finance Minister Travis Toews.
Toews said there are three main focuses: ensuring health care is properly resourced, positioning the economy for recovery, and ensuring that government services are being delivered most efficiently.
Highlighting the budget is a $1.25 billion contingency to continue the fight against the pandemic, which includes $900 million being added to the base budget for the Ministry of Health which can reduce surgical wait times, increase continuing care beds, and boost home care capacity.
In terms of jobs, as the pandemic worsened an already sputtering economy, the province is increasing the money available for construction projects by a further $1.7 billion to a total of almost $21 billion to support approximately 90,000 jobs.
Money is also being made available to support other sectors that will be key to a post-pandemic recovery, such as tourism, agriculture, energy, and technology
Ahead of the budget’s release, there were heavy fears around massive spending cuts that could impact some other ministries and the public sector. While there are cuts in some areas, the province is forecasting expenses in excess of $60 billion and there is an expected deficit of over $18 billion. Overall revenues are projected to be in the range of $43.7 billion, higher than 2020, with hopeful increases by several billion dollars over the next two years.
Budget 2021-22 predicts $18.2B deficit, bringing debt to 115.8B.
— Courtney Theriault (@cspotweet) February 25, 2021
The deficit moving ahead is also expected to shrink to $11 billion in 2022-23 and $8 billion in 2023-24, with the decline attributed to decreasing expenses as the worst effects of the pandemic should be subsiding and the government continues to make moves to modernize service delivery by cutting more expenses.
There is also some optimism in the overall economic outlook, as COVID-19 vaccines become more widely available and oil prices could end up being slightly better than projected two years ago. In addition, the decline in the GDP was not as bad as expected and it is expected to grow by about half a per cent more than forecast at the middle of 2020.
The government projects that the Alberta economy will reach pre-COVID levels by 2022, one year earlier than forecast.
Finance minister expects economy should be back to pre-pandemic levels by 2022, a year earlier than forecasted.
— Courtney Theriault (@cspotweet) February 25, 2021
“Albertans continue to face one of the most difficult times in our history,” said Toews. “Right now, this government is focused on our three key priorities and Budget 2021 reflects those key priorities.”
Following the large retraction in the economy due to the pandemic and other factors that have been described as a “triple whammy” by Premier Jason Kenney, the biggest portion of new cash in the 2021 budget is directed towards spending that will combat COVID-19 and provide further support through the health sector.
While the pandemic greatly increased overall health spending, when efforts against COVID-19 are subtracted the expenses were actually $75 million lower than projected in the previous budget. Moving forward through the rest of this year, though, the government is adding four per cent on to the base health budget. This will inject $900 million into the ministry, while efforts continue to maintain operating expenses over the following two years as Alberta Health Services looks for more efficiencies that bring health spending more on par with other provinces.
Toews said there are still long-term goals to further reduce spending and staffing but they need to ensure the proper resources are on hand in the short-term to handle the pandemic.
“Right now, we are well on track with respect to the Alberta public service and our plans on right-sizing the public sector. And in terms of health, right now our priority is ensuring health is resources and staffed to meet the pandemic,” he said.
As the pandemic changed how some health services are delivered, there is also an expectation that some of these changes will become more permanent. For example, virtual care offered greater flexibility for doctors and patients and while in-person visits will continue, virtual services are also expected to become a regular feature to both improve access and reduce some costs.
Also as part of the COVID-19 contingency plan aimed at supporting health care, there is an increase of $200 million earmarked for continuing care, community care, and home care programs.
Along with that, there is still a commitment to better fund mental health and addictions services around Alberta, tied to a previously announced investment of $140 million over four years.
Other investment strategies target several sectors as part of a recovery plan responding to economic pressures that have existed both before and during the pandemic, which can hopefully lead to a broader boost in jobs and business growth.
The technology sector will be one of the crucial sectors covered in this, with the Alberta Innovates Corporation receiving an increase of $15 million this fiscal year to streamline processes for entrepreneurs.
Agriculture, tourism, and of course energy are all seeing specific growth strategies in the budget as well with targets to grow investment in these areas and spark long-term growth.
Other programs like the Alberta Jobs Now Program and the Alberta Advantage Immigration Strategy will aim to attract more employment options and a growing workforce to assist with growth as well. Toews could not provide further details on what exactly the Alberta Jobs Now Program consists of, but teased it would involve on-the-job training and include a federal component, with more information to come at a later date.
The education sector also received a large increase in money to help deal with the pandemic, and there will be more investment in kindergarten to grade 12 spending. There is no penalization for any decreased enrolment numbers, as it is largely due to pandemic effects and changing delivery of education, and there is over $8 billion earmarked for K-12 education services.
However, there will be a decrease in post-secondary spending and the government is tying funding towards performance-based metrics in colleges and universities. There are some programs being added into the sector as well, though, which could possibly boost employment or training options for students.
Revenues, spending and deficits
Upon taking power in 2019, one of the main goals for the United Conservative Party was to bring down deficits and present a balanced budget. However, this will not be possible with the current budget due to many of the aforementioned issues that have bogged down the economy.
“Firstly, I’m not happy with COVID-19, having to deal with the pandemic and the resulting economic challenges of the province, but this is where we find ourselves and we have to adjust,” Toews said. “I am also very disappointed that we can’t present a balanced budget in our first term. But, simply put, with the drastic drop in Alberta Government revenues as a result of this pandemic and economic collapse, we simply cannot do that.”
Toews said they have identified “fiscal anchors” to help keep spending in line as much as possible, and even with the growing deficit the province still projects to keep the net debt to GDP ratio under 30 per cent. There will also be continued attempted to align per capita spending with other provinces, in relation to the MacKinnon Panel Report which identified issues with spending across various sectors. Then, a path to balance the budget can be established once the worst of the pandemic is behind us.
The deficit this year will be over $18 billion, with debt rising above $130 billion by the end of the four-year fiscal cycle.
In terms of spending, one of the more regular targets of the provincial government has been public sector compensation, with more negotiations expected around reeling in wages and preventing major increases for Albertans working in the public sector.
The budget forecasts an overall decrease in public sector compensation this fiscal year by just under a billion dollars, with further decreases over the following two years.
“We’re not on a path of cost-cutting, we’re on a path of delivering government services most efficiently,” Toews said.
Toews also shut the door once again on any new or increased taxes, as he said it is not the right time to impose such costs while they are focused on a recovery. The government also sped up the decrease in corporate income tax, with a hope this will also spur more growth in the near future.
“What we’re saying is, we’re looking to manage what we can manage today,” Toews added, and there will be more economic clarity over the next few years which will offer the opportunity to look at what other options may lie ahead.
Toews said they are also looking into appointing a revenue review panel that will explore further options as well.
A focus on growing the energy sector will also be maintained through the province’s financial plan, as there have been significant struggles most recently highlighted by the cancellation of the Keystone XL pipeline permit in the early days of President Joe Biden’s administration last month.
On Keystone, the budget detailed that Alberta is being exposed to over $1.2 billion through the plan after Alberta invested a large amount of money into it. Toews stood by that investment and said it was a calculated risk, and they will look at other options to see what can balance out any losses and help boost production.
“We’ve been transparent in this fiscal plan in terms of Alberta’s exposure,” Toews said.
Toews added that there is still more investment happening in the petrochemical sector, including an incentive program that will be enhanced compared to what was developed by the past NDP government.
“Petrochemical manufacturing investment is an area we believe we can be competitive in, we’re looking to attract additional investment and I can say there’s interest,” Toews said. “This is part of our overall strategy to position the province for disproportionate investment attraction and job creation.”
Renewable energy is also mentioned in the budget, with a note that it will be combined with more natural gas consumption to help fuel expansion outside the traditional oil and gas extraction route.
In terms of oil prices, the government is also making more conservative predictions even though there is an expectation prices will continue to rise in the coming year. There is “cautious optimism” in the budget, and the market is still not expected to return to 2019 levels until 2024.
There are low and high scenario projections in terms of oil prices, and these numbers will largely impact the revenue and expense sections of the budget. On the side of lower prices, the deficit could grow above $20 billion but under a high-price scenario the deficit could be cut down to over $15 billion.
Continued efforts will be made to construct energy projects that can both provide electricity generation and fuel for the people of Alberta, while also getting more resources to market to increase revenues. There are mentions in the budget about how the federal government must step in with greater attempts to support and enhance these projects.
Odds and ends
The overall fiscal plan outlined by the province is a large document, totalling more than 200 pages and covering all sectors in the province. It is a modest projection that does not foresee large cuts in the immediate term, although there may be more significant movement in the future. Revenue levels are also not projected to be extremely lofty, as the last year especially highlighted the unpredictability that Alberta continues to face.
Even though the economy took a major blow through the last year, there is still money available for many projects that people hope for. In terms of municipal spending, there is ample cash still available for LRT projects such as the Green Line in Calgary, including $25 million coming from the province this year. There is also money being made available for road and bridge upgrades all through the province, and money for schools and expanded healthcare offerings.
That said, there is an increase to the Municipal Susatinability Initiative to around $1.2 billion in the coming year but it is then vastly decreased to over half a billion dollars in the years that follow. This could play a role in affecting the projects that municipalities try to construct.
The budget includes $288 million for education projects, including 14 school projects, $143 million for five health care projects around the province, $177 million for transportation, and $48.7 million for capital parks within the purview of the Ministry of Environment and Parks.
The Calgary Zoo also gets a specific mention, with $15.5 million invested through the 2021 capital plan to assist with the zoo’s efforts to expand and offer new programming. This will include expanding the river otter habitat and establishing new habitats for polar bears and related arctic species through a plan to redevelop the Canadian Wilds exhibit.
Further supports will also be on the way for Children’s Services, along with Seniors and Housing. This includes a $15 million increase to support at-risk children and families, and $16 million for the Rental Assistance program to assist with affordable housing programs.
For Community and Social Services, there is a $5 million promise to support employment for Albertans with disabilities, and $7 million for the Civil Society Empowerment Fund to help non-profits and charities. There is also a commitment of $209 million over three years to assist in part with housing options, aiming to build 1,800 additional units. The Assured Income for the Severely Handicapped program (AISH) is also no longer set to receive a reduction, as funding will be increased over the next three years, going from $1.35 billion in 2021-22 to $1.49 billion in 2023-24.
Agriculture and forestry sectors are also getting a focus, with a target included to attract $1.4 billion in investment and create 2,000 jobs in areas such as hemp, agri-technology and value-added processing. Money is also being put forward to modernize irrigation infrastructure around the province, with money also being invested through the Canada Infrastructure Bank.
The government says the budget can protect lives and livelihoods, by turning most investment towards health and laying a groundwork for economic growth that can help spur more recovery. There is a hope that the province can emerge stronger than ever, after one of the toughest years on record.