Whose Future?

When the United Conservative government set out to write their first budget under Danielle Smith’s leadership, they likely intended the title “Securing Alberta’s Future” in the narrow fiscal sense. A deeper reading of the government’s subsequent budget-related announcements and legislative agenda suggests that multiple futures are being claimed and contested: political and electoral futures, as well as ideological and existential ones.

Despite the appearance of a détente following Jason Kenney’s departure, tensions remain within the party and the base over what the UCP is meant to represent and what “taking Alberta back” really means.

The electoral equation is a given, following the old Progressive Conservative playbook of appearing to spend freely when the resource revenues are rolling in, only to claw back the funding when the tide turns. But this myth of high public spending is  fragile. In fact, it may even be insufficient to cover the cracks, as we can see in the brief bump in health-care funding.

How each of these future battles is playing out matters significantly for Alberta’s future, not least in the unanswered question: “Whose future?”  In this article, we break down the possible futures at stake in the lead-up to the spring election and its political aftermath.
 

Austerity in times of surplus

With the help of record-high resource royalties of $27.5 billion, the Government of Alberta had a budget surplus of $10.4 billion in 2022-2023. Despite surging royalty revenue, the UCP’s four-year austerity budgeting continued in 2022-2023, with a 2.9% cut to operating expenses. The cut is the result of operating expenses only increasing 5.8% from the prior year, while inflation plus population growth was 8.7% in 2022-2023.

Budget 2023 projects the provincial government will achieve a surplus not only this year, but also in 2024 and 2025. The forecasted surpluses depend on three factors. First, they depend on whether the UCP will be re-elected, in which case their austerity agenda will continue, with operating expenses not keeping up with inflation and population growth.

Second, the forecasted surpluses depend on several optimistic assumptions about Alberta’s economic outlook for 2023-2026. The UCP’s strong belief in the power of low corporate taxes also led them to make predictions for Alberta’s economic growth, job growth, and housing starts that sound bullish when compared to the average predictions made by over a dozen private forecasters (e.g. banks and economic consultancies).

Third, and perhaps surprisingly, the UCP forecasted oil price range of US$70-$80 a barrel for West Texas Intermediate (WTI, the North American benchmark oil price) in all four years is below the average price prediction of the private forecasters. If the private forecasts are accurate, the UCP’s conservative oil price prediction may lead the government to realize larger surpluses than expected. Alternatively, if the price of oil drops, then the government has hedged their bet and the resulting budget deficit will be a bit smaller than if the UCP had been more optimistic with its oil price forecast. It is also the case that a conservative oil price prediction helps provide cover for the UCP’s ongoing austerity agenda.
 

Revenue

The government’s revenues are now more reliant on the resource rollercoaster than ever before. During the New Democratic Party’s four-year term, the government collected $16.3 billion in resource revenue in total. Their highest annual royalty total was $5.43 billion in 2018-19, which represented 11% of total government revenue. In the UCP’s four-year term, in contrast, the government received $52.74 billion in royalties. In 2022-2023, the UCP government benefited from a record-high $27.5 billion in royalties, which was 36.2% of total government revenue.

The 2023-2025 forecast for royalty revenue is $51.4 billion or an annual average of $17.13 billion. The main reasons for the continued high royalty revenue estimates are the expectation that WTI prices will remain in the US$70-80 range and the fact that five oil sands projects have reached the post-payout phase, when the royalty rates are higher. Two more oil sands projects are expected to reach the post-payout phase in the next few years, which will bolster the government’s coffers further.

In their first two years in power, the UCP cut the corporate tax rate from 12% to 8%, forgoing more than $1 billion in annual revenue. At the same time, the UCP de-indexed personal income taxes from inflation, resulting in Albertans paying higher income taxes in 2019-2021. Budget 2023 re-indexes personal income taxes retroactive to 2022; however, with the high inflation rates of 2021, Albertans are still paying higher income taxes now than they would if the UCP had not de-indexed income taxes for three years.

Corporate taxes are forecast to drop from $6.4 billion in 2022 to $5.9 billion in 2023, in large part because the average price of WTI in 2022 was about US$90 and it is expected to average US$79 in 2023. Personal income taxes are forecast to increase in each of the next three years from $13.8 billion in 2022 to $16 billion in 2025 because of the previous de-indexation and the UCP’s optimistic assumptions about employment and wage growth in the coming years. In 2023-2024, 56.3% of the government’s tax revenue will be from personal income taxes ($14 billion), while only 23.6% of total tax revenue will be from corporate taxes ($5.9 billion, including $307 million in small business tax).

Other revenue sources are forecast to increase in 2023-2025. With the new health transfer agreement between the provincial and federal governments, transfers from the Government of Canada may grow to upwards of $15 billion annually, or about 20% of the total Government of Alberta revenue.

Revenue from premiums, fees, and licenses has steadily increased in the UCP’s time in power because the government raised rates for school fees, park passes, museum passes, and motor vehicle licences. The UCP also made deep cuts to operating grants to universities and colleges and allowed post-secondary institutions to significantly raise tuition fees. Crop, hail, and livestock insurance premiums will also more than double from 2021 to 2024. In sum, revenue from premiums, fees, and licenses increased from $4.5 billion in 2021 to $4.8 billion in 2022 and is forecast to increase further in 2023-2025.

High oil prices in the last year led to elevated gasoline and diesel prices. The UCP temporarily paused the provincial fuel tax as part of its affordability plan. This resulted in the government forgoing $850 million in fuel tax revenue in 2022 and an estimated $875 million in 2023. The pause on fuel tax collection ends on June 30, 2023.

Starting in July 2023, the fuel tax rate will be determined quarterly based on the average price of WTI. Budget 2023 estimates that the government will collect $769 million in fuel tax in 2023-2024, based on the predicted average tax rate of 7.75 cents per litre for the fiscal year.
 

Debt

In 2022-2023, the UCP used about half of the record $27.5 billion in resource royalties to pay off $13.4 billion in maturing long-term debt. It seems like a safe assumption that the UCP will rely heavily on this one-time debt reduction for their self-promotion as a supposedly fiscally responsible government in the upcoming election campaign.

The truth, however, is the Government of Alberta continues to be overly reliant on volatile resource royalties and does not raise enough other revenues to pay for essential public services, infrastructure, and debt repayment. During their time in power, the UCP has not improved the government’s chronic revenue shortfall. Arguably, they have made the situation worse by cutting corporate taxes by 33% and forgoing more than $1 billion a year in public revenue.

So, even with annual royalties forecast to average $17.13 billion in 2023-2025, taxpayer-supported debt will increase in 2023 by $5.5 billion, in 2024 by $5.8 billion, and in 2025 by $14.4 billion. Interest payments on taxpayer-supported debt are forecast to decrease by $120 million in 2023, and then increase by $59 million in 2024 and by $356 million in 2025. The net result is that annual interest charges on taxpayer-supported debt in 2025 will be a bit more than $2.5 billion, which is about what it was before the UCP made the 2022 debt repayment.

The new debt in 2023-2025 will help pay for the capital plan (infrastructure), but mostly it will be used to refinance maturing long-term debt. The big increase in debt in 2025 is mainly because the government is forecast to refinance $13 billion in maturing long-term debt.

Even though the UCP’s forecasted price for WTI is on the conservative side, oil prices are volatile and hard to consistently predict with accuracy. Oil prices may drop, for example, if a global recession reduces demand, or if COVID lockdowns return to China (the world’s largest oil importer), or if Saudi Arabia floods the oil market. Then the Government of Alberta may need to borrow more money than expected or delay needed infrastructure projects (for example, construction of the Red Deer and South Edmonton hospitals).

The surplus being celebrated has been made possible not just by the rising fortunes of oil and natural gas prices, but also by the approximately $10 billion the UCP cut from Alberta’s public services since 2019. The UCP claims that the large annual cuts to public services bring Alberta’s spending “in line with comparator provinces” (British Columbia, Ontario, and Quebec). But the truth is the shortfalls that have been felt in health care, K-12 education, advanced education, and social care and assistance are so large that they cannot be reversed with a one-time injection of cash. The cumulative effects of the last four UCP budgets represent a redistribution of wealth that will have generational impacts.

Budget 2023 has been lauded and criticized in equal measure for its “high spending,” yet in important ways funding falls short for these essential services. Most services will see a per capita decrease, few will meet Minister Toews’ spending-growth ceiling of inflation plus population growth, and all are subject to restrictions or lack of detail on where the money is to be spent.

The Alberta wage advantage was never intended to include public sector workers at the frontlines of health care, education, or social care — despite the vast potential to shift towards a well-being economy or care-based economy.
 

Health care

It may have been pure coincidence that a new federal-provincial health accord was agreed upon just days before the budget, so one might reasonably forgive the Smith government for omitting any details of how this new funding will be allocated. However, as the bloc of conservative premiers has indicated, the intention was never to use that money to increase health-care funding in absolute terms. The federal funds will undoubtedly be used to offset the nominal increases being made at the provincial level, leaving more budget room for surplus celebrations and corporate tax cuts.

While the UCP government may crow about 'historically high' health-care spending, average budget increase has been trending below population growth plus inflation since 2015 (with the exception of 2020 due to federal COVID relief). Per capita health spending in Alberta is now significantly lower than comparator provinces, of which Finance Minister Toews proudly boasted in his budget address.

The first UCP budget in 2019 included a startlingly low increase of 1.7% for health care, and it was only the influx of cash necessitated by the COVID-19 pandemic measures in 2020 that prevented that average from dipping even more severely.

Budget 2023 claims to secure the future health of Albertans with an increase of 4.1% in health-care funding. A considerable chunk of this is targeted to the UCP’s Health Care Action Plan, which purports to address multiple, concurrent, and systemic crises within health care through selective injections of cash to emergency medical services (EMS), primary care, staffing, and surgical wait times.

Primary care will see an increase of $243 million over three years, while EMS is allocated an additional $196 million over three years and $15 million for new vehicles and equipment. The significant increase of 23% over the previous budget affirms what paramedics and their associations have maintained for years — that EMS has been severely underfunded to the point of crisis.

Physician and nurse recruitment receives $158 million earmarked for 1,800 new post-secondary seats to train health care aides, licensed practical nurses, and registered nurses, along with 120 additional seats for physicians. Yet even with these new seats, the University of Alberta will have fewer medical seats in 2023 than it did in 2008. Through an agreement with the Alberta Medical Association, $250 million over four years is set aside for family physician recruitment targeted at rural areas — almost the exact amount of the decrease in physician compensation in 2025-2026.

Public funds continue to be diverted to private surgeries: $237 million over three years will be diverted to the Alberta Surgical Initiative capital program, of which only $120 million is earmarked for new projects in AHS-owned facilities. This wording is deliberate and important: it may suggest public funding to revamp public OR spaces to accommodate for-profit providers, instead of a true investment in optimizing public surgical delivery. It also highlights that 49% of that capital funding — $117 million — will go to private, non-AHS facilities.

Budget 2023 also quietly includes Premier Smith’s pet project: Health Spending Accounts. While not attached to any specific monetary amount, a mandate has been directed to Alberta Health to implement the program no matter how unpopular or contrary to evidence.
 

Seniors and long-term care

Budget 2023 puts money toward the modernization of infrastructure, new spaces in continuing care, and a significant shift of resources to home care, with a caveat: the majority of those will go to private providers. Greatly welcome but long overdue was the funding to increase time spent on direct care to the four Hours Per Resident Day recommended by advocates and researchers, as well as supported by the Facility-Based Continuing Care (FBCC) Review. However, this increase will not be underpinned by legislation to update the minimum required hours of care, and Budget 2023 does not include explicit funding to implement the new federal standards of care.

Also absent is a detailed staffing strategy to retain and recruit staff in seniors’ care, even as it pledges up to $1.79 billion over five years for personal support workers and health-care aides. And while additional money has been earmarked to modernize existing continuing care facilities and create new spaces, there has been no commitment to prioritize public, not-for-profit providers.

Meanwhile, the FBCC review recommended that home care services should be bolstered to enable more seniors to remain at home longer; yet figures included in Budget 2023 indicate that from 2018-2019 to 2021-2022 fewer hours of available home care were spread over a greater number of users.
 

Mental health and addiction services

While funding for mental health and addiction services has increased, the UCP government’s ideological and moralistic adherence to a recovery-based model will not address the immediate pressures of the overdose crisis. More worryingly, it is likely to exacerbate downstream impacts on EMS, hospitals, and social services. Instead of addressing the causes and impacts of “crime” through addressing social determinants and improving services, the budget doubles down on criminalization, allocating $27 million for 245 new sheriffs.

Social services workers are to receive an additional $330 million over three years to boost wages. On top of a $25 million (5%) increase to operational funding, this would provide top-ups for approximately 21,000 disability support workers, homeless shelter staff, and family violence prevention workers (but not those working in domestic violence shelters — see “gender issues” further below).
 

K-12 education

In a pre-budget press conference, Finance Minister Toews emphasized that Budget 2023 would prioritize “funding for enrollment.” That will be a pleasant change from previous UCP budgets, which left thousands of new students unfunded across the fastest-growing boards. However, the 5%  increase to the K-12 operating budget doesn’t begin to cover inflation or the shortfall created by previous cuts.

Edmonton Public School Board, for example, estimates an increase of 4% in new students in 2023-2024, and the “bridge funding” to alleviate the worst impacts of the three-year rolling average formula will now be discontinued. Funds for classroom complexity, learning loss, and special needs are one-time, inconsistent, and insufficient.

Press announcements for capital spending and school transportation funding deliberately focus on the eye-catching totals, while downplaying that for the first time a significant chunk of  that funding is going to private and charter schools. Charter schools will receive $87.5 million over three years for expansion, and $171 million for the creation of a "hub" for charter organizations, while public, separate, and francophone collectively split $1.4b on renovations and new constructions.

Of the $414 million budgeted for bussing for the 2023-2024 school year, $12.5 million is allocated to private schools. Education Minister Adriana LaGrange  implied that this new funding would be divided equally among public, separate, charter, and private boards – without providing any actual numbers: "Every parent is a taxpayer and they deserve to have their dollars distributed equally across all school authorities."

This not only leaves the instructional budget for public boards with a much smaller increase than the headlines suggest, but also copper-fastens the UCP’s  agenda to marketize K-12 education in Alberta. The overall effect is that a lot of money is being shuffled into new envelopes, but with Alberta’s  per-student funding still the lowest in Canada, little will change in the available resources for public schools.
 

Advanced education

Budget 2023 offered a slight correction to the punitive cuts of past years, but it continues to avoid any breakdown of impacts to specific institutions. Despite a small increase of 0.6% to the bottom line, this budget cements a deliberate shift in the fiscal foundation of public post-secondary institutions: where previously provincial funding had comprised a majority of Post-Secondary Education Institution’s (PSEI) operating revenue, in 2023-2024 that share will decrease to 46%. This strategy was already outlined in Budget 2015, which stated that “The government will work with post-secondary institutions to transition over five years to a more sustainable model that reduces the system’s reliance on government funding.”

For perspective, the 2023-2024 operating budget of $5.29 billion represents a barely perceptible increase over the $5.18 billion allocated in the DOA 2015 Prentice budget. The UCP government has handed PSEIs an explicit edict to rely on own-source revenues, all while capping tuition increases to 2% in 2024-2025. This may provide some nominal relief for students, who since 2019 have seen tuition increase by over 20% at the University of Alberta, for example. But it also leaves many PSEIs essentially hamstrung. Their fiscal options will be limited to drastic tuition hikes for international students, dramatically slashed programs, a fire sale on real estate, more precarious workers, or likely all of the above. And while in his budget speech Finance Minister Toews lauded Advanced Education Minister Nicolaides for creating 10,000 new seats across PSEIs in Alberta, this new money is very selective and signals that only sectors deemed important by the UCP can rely on increased funding.
 

Gender issues

Like its UCP predecessors from 2019-2022, Budget 2023 eschews any attempt at gender-based impact analysis and includes no substantive mention of women. It fails to provide any additional funding for shelters or domestic violence supports. This omission is particularly concerning given the recent rise in domestic and sexual violence against women and girls during the pandemic, as well as increases triggered by the 2015 oil price crash. That is damning enough in itself, without even mentioning the damage caused by Premier Smith’s attempt to blame the umbrella organization for sexual assault services for the lack of funding allocated in Budget 2023.

More complex is the UCP’s broader approach to women-as-Albertans. Still two steps behind from the economic hits they endured during the pandemic, women remain at best an economic afterthought and at worst a target for fiscal punishment in Budget 2023. Women-dominated public services such as health care and education have been devastated in successive UCP budgets, only to be offered a few more breadcrumbs pre-election.

Notably, the government reserved its announcements on two initiatives for women for International Women’s Day: one, taking credit for federal funding to recruit immigrant women into the childcare sector, reinforces the gendered stereotype of women as caregivers; the other, encouraging more women into trades through funded apprenticeships, continues the long-established Alberta tradition of assuring women they can “secure their futures” by joining the men in real work. Together, these announcements promote a false dichotomy for women that entirely ignores health care and education, two of the largest employment sectors in the province.
 

Rural Alberta

Rural health facilities revitalization gets just enough in this budget to appear to matter: $105 million over three years, but there is no movement on much-needed upgrades to the Red Deer Hospital or a new hospital for southwest Edmonton (and no, the private-for-profit corporate health hub built with public funds doesn’t count).

But despite a few high-profile packages (such as health-care recruitment funding and infrastructure projects), the real signal to rural Albertans is intended to be encoded in the language and in the proposed legislation for the spring sitting — the last legislative salvo before the election writ is dropped. The introduction of the Alberta Firearms Act, alongside amendments to the Trespass to Premises Act and Petty Trespass Act in order to prevent the entry of federal government employees onto private land, represent significant pushback against federal authority, wrapped in libertarian rhetoric.
 

Conclusion

All of the above indicate that the preferred future for the UCP is a divided Alberta under the Gadsden flag, one predicated on entrenched privilege and “taking Alberta back,” one in which privatization of health care, seniors’ care, and education is embedded in (and corrosive to) these essential public services, one in which post-secondary education is in hock to corporations and industry, and one in which the exploitation of natural resources overrides any attempts to shift to a sustainable economy that centres on well-being.

As for Alberta’s public services, the damage has been done. Smith’s predecessor as premier did his level best to hasten and capitalize on the crises provoked by the pandemic, and Smith’s budget exhorts us to celebrate as she applies band-aids to the fractures. Should she win the upcoming election, her next move will be to cement the new normal and secure this particular future.