When the United Conservative government tabled their third budget last week, they made the political choice to protect the bottom line of corporations rather than truly invest in things that would help Albertans and the economy recover.
Budget 2021 includes a major tax giveaway for large corporations, negligible stimulus funding during the ongoing COVID-19 pandemic, zero consideration of gender-based budgeting, and no plan for economic diversification. In other words, despite the COVID-19 pandemic, Premier Kenney’s government barely changed their fiscal strategy from that included in their 2019 election platform.
Below are some of the key takeaways and impacts of Alberta Budget 2021.
Alberta’s revenues were greatly reduced this year due to the COVID-19 pandemic and the economic downturn, but also because of decisions by the UCP Alberta government to give a huge tax break to corporations. Total revenue for 2020 was $42.3 billion, $7.7 billion or 15.4 per cent lower than Budget 2020 estimated.
The Alberta government’s largest source of revenue in 2020 was the federal government. In response to the pandemic, the federal government increased transfers to Alberta by $2.27 billion. In total, federal transfers accounted for $11.38 billion or 26.9 per cent of Alberta’s 2020 revenue.
At $10.94 billion or 25.9 per cent of total revenue, personal income tax was Alberta’s second largest source of revenue in 2020. Total revenue from personal income tax was down in 2020 by $308 million or 2.7 per cent because of job losses in 2019 before the onset of COVID-19. Despite significant additional job losses in 2020 due to the pandemic, Budget 2021 forecasts an increase of $403 million or 3.6 per cent in personal income tax revenue because of income received by Albertans in 2020 through the Canada Emergency Response Benefit.
It’s also the case that in Budget 2019 the United Conservative government paused the indexing of Alberta’s level of personal income tax exemption, which had been indexed since 2001 (Albertans don’t pay income tax on roughly their first $19,000 of annual income because of the exemption). This means Albertans are paying more of their income in provincial tax.
In sum, a bit more than half of the Alberta government’s revenue in 2020 came from federal transfers and Albertans’ income tax. These two revenue sources are expected to account for half of the Government of Alberta’s revenue again in 2021.
On the other hand, corporate income taxes only accounted for $2.24 billion or 5.3 per cent of Alberta’s 2020 revenue. Tax revenue from large corporations came in at half the total forecasted by Budget 2020 as a result of reduced company profits during the pandemic. Company losses in 2020 will reduce the amount of tax paid by large corporations in the next two years as well.
On top of these multi-year reductions in corporate income tax revenue, the United Conservatives accelerated their tax giveaway to large corporations. Alberta’s corporate tax rate is now eight per cent, or about 30 per cent lower than any other province. The Alberta government estimates 2021 corporate income tax revenue at $1.89 billion, or less than half of the 2019 total. The UCP’s corporate tax giveaway is costing the Alberta treasury more than $1 billion each year. These funds could be going to core public services instead of the bottom lines of large companies.
On top of giving away $4-$5 billion in tax to large profitable corporations over their four-year term, the United Conservatives cancelled the Notley government’s crude-by-rail contracts. The cancellation of the rail contracts will cost Albertans $2.3 billion in total. The other costly oil infrastructure mistake of the United Conservative government is their gamble on Keystone XL. Although not fully accounted for in Budget 2021, Premier Kenney’s risky bet on Keystone XL could end up costing Albertans close to $2.5 billion in total.
The days of resource revenue accounting for 30-50 per cent of Alberta’s annual income are gone and not coming back. In 2020, bitumen royalties and other resource revenue are the two smallest sources of government revenue at 2.6 per cent and 2.1 per cent respectively, or 4.7 per cent in total. Total resource revenue is forecast to be 6.5 per cent of government revenue in 2021, and 10 per cent in 2022.
As Parkland Institute research fellow Bob Ascah noted, the United Conservative government is being cautious with its oil price forecast for the next three years, so Alberta may end up receiving more resource revenue in the forecast period than is estimated in Budget 2021.
Amazingly, the Alberta government received twice as much revenue ($3.96 billion) from premiums, fees and licences in 2020 than it did from resource revenue ($1.98 billion). In fact, besides federal transfers, the only other revenue source that increased in 2020 compared to 2019 was premiums, fees and licences.
Part of the United Conservative’s fiscal strategy in each of its three budgets has been to nickel and dime Albertans, with increases to various user fees related to motor vehicles, land titles, museums, parks and campgrounds. The government also increased tobacco and vape taxes in 2019.
Overall, Alberta still has the lowest taxes in Canada by a large margin. If Alberta had the same tax structure as the next lowest taxed provinces (Ontario and Saskatchewan), the provincial government would be working with an additional $13.3 billion in revenue each year. In a normal year outside of the pandemic, this revenue would eliminate the budget deficit and allow for investments in public services that support Albertans and our economy.
While mainstream media have expressed relief that Kenney’s oft-threatened “fiscal reckoning” appears to have been deferred, this budget is by no means a win for Albertans. Every major service is facing a cut in real terms this year or next. Albertans are being asked to shoulder the shortfall created by the UCP's political choice to prioritize corporations over people.
This budget fails to invest in public services that would bolster our economic recovery, and makes no mention of the Albertans who stand to lose the most.
The most significant omission in this budget is women. Child care, the main driver for getting women (and other caregivers) back to work, suffered a huge $14.5 million cut in the 2020 budget which has been followed by an additional reduction of $500,000 in 2021. The impact of the UCP’s cancellation of the $25/day child-care pilot is only partially offset by an increase to low-income subsidies. The one-time $561 payment to qualifying parents is political theatre – covering two weeks of care at 10 per cent of the cost of a universally affordable system.
Also of concern is the lack of transparency in Alberta Budget 2021 on the approximately $45 million committed by the federal government for the child-care sector. There is no indication in the budget this money will be used to increase accessibility or affordability. The funding for additional child-care spaces falls short of demand and does not acknowledge how many parents would choose to be back at work if affordable spaces were available. This flies in the face of a vast expert consensus: the pandemic has exacerbated the she-cession, and universally accessible and affordable child care is not only a net benefit to economic growth – it is essential.
Post-secondary education faces a cumulative 20 per cent cut over 2018-19 funding levels, and the sector is bracing for additional reductions of 11 per cent and seven per cent over the next two budgets. Three of the four research universities (U of A, U of C, U of L) bear between 60-70 per cent of these cuts, with nearly half borne by the U of A alone.
These cuts will hasten what was already a free fall for advanced education in Alberta – impacting teaching quality, support services and future research. Students will face additional increases to tuition (up to seven per cent annually) at a time when student financial aid has been frozen.
In health, claims of “historic high spending” are misleading: a marginal increase this year is due in large part to the $1.25 billion Covid Contingency Fund, which will only be distributed if (when?) Alberta is hit by a third wave of the virus. Operational spending for Alberta Health is actually down nearly $1.2 billion from 2019-2020 levels, and will be followed by a two-year freeze from 2022-23 to 2023-2024.
Meanwhile, population growth and inflation are estimated to be around nine per cent over the next three years (2021 Fiscal Plan, p. 14). Health, like our other services, will be asked to do more, for more Albertans, with fewer resources. Meanwhile, money that should be used to strengthen our primary health care and hospitals will instead be diverted to private contracts via the Alberta Surgical Initiative, the CT & MRI Access Initiative, and the Continuing Care Capacity Program.
Finance Minister Travis Toews stated the Ernst & Young recommendations to cut programs, privatize, and layoff staff within AHS would be implemented. Instead of investing in the future of our health care, this is an investment in a for-profit model of delivery.
Continuing care will see a six per cent increase over 2019-2020 levels, after a negligible increase in Budget 2020 ($567,000 over 2019 actual). Despite the urgent need for increased public investment to support frail Alberta seniors during the pandemic, funding in 2020 for staffing, PPE, and updated facilities was down over $2.4 million from the previous year. This will be compounded by minimal increases (less than one per cent) over the next three years.
Following the province’s unpopular decision to consolidate ambulance dispatch in many municipalities, funding for ambulance services will be frozen for the next three years.
Accounting for population growth and inflation, public K-12 education once again faces a cut to funding per student, and instructional funding is being cut in absolute terms. Meanwhile, schools across Alberta will be expected to implement an entirely new (and problematic) curriculum next year with no budget commitment to additional resources, while private schools will get an increase of $10 million.
Public sector compensation will be reduced by approximately $800 million this year, and faces a staggering $1.3 billion cut from 2019 levels by 2023-24. During the 2015 economic downturn, the public sector was a significant factor in keeping GDP and consumer spending from tanking. Many households where oil and gas workers faced decreased earnings or lost their jobs entirely were buoyed by the second income earner (often female) in the public sector. These cuts rely on a false narrative that “past governments” failed to make “tough choices” on public sector compensation: under the former New Democrat and Progressive Conservative governments, most public sector workers endured years of wage freezes.
Vulnerable, marginalized Albertans, and equity-seeking groups are also facing significant cuts to life-saving services: while AISH benefits have been maintained, employment supports and homeless and outreach support services have been reduced by 15 per cent from 2019 levels; and disability supports have been cut by 0.4 per cent from 2020 levels. Aside from a previous announcement of new spaces in addiction treatment facilities, there is no additional funding for mental health and addictions.
For municipalities, downloading the costs of these services and supports, while decreasing the Municipal Sustainability Initiative and reducing municipalities’ budget flexibility, is a circle that can’t conceivably be squared. Edmonton and Calgary, already facing drastically reduced revenues, are being pressured to maintain a zero percent increase to property taxes while seeking ways to privatize facilities and contract out service delivery.
Premier Kenney declared that his budget definitively answered the single most pressing question for Albertans: “Will this budget get us to the other side of the storm? We think the answer is yes.”
What Kenney fails to acknowledge is that this budget only offers a leaky life raft for a privileged few, while the majority of Albertans are left treading water. “The storm” is not just the pandemic. It has been compounded by the disastrous decisions of this government. Like cuts to the province’s fire pre-suppression program, this budget undermines and neglects our ability to prepare for the challenges of the future, while doing little to address the crises of the present.
The compounded impact of years of cuts will be catastrophic. The United Conservative government is cutting or privatizing services that Albertans rely on in order to pay for their 33 per cent tax giveaway to large profitable corporations and for their mistakes of cancelling the crude-by-rail contracts and gambling on Keystone XL. On par with Premier Klein’s massive cuts in the late 1990s, the result will be deep structural changes and a legacy of lasting damage.