Braid: Kenney is stuck in an alternate universe of debt — and, possibly, a new sales tax

The deficit in the fiscal year ending in March will be $20.2 billion. In the new budget year, it’s expected to be $18.2 billion, every penny borrowed

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There must be days when Alberta Premier Jason Kenney wonders how he ended up running the wrong government.

The United Conservative Party in its own dreams would spend small, borrow no money, and allow people to go about their lives with little thought to an overarching government.

Kenney’s UCP today, through circumstance and ill fortune, is in some ways the opposite, a tale outlined painfully in the new budget introduced Thursday.

Debt is now running so high that annual payments outstrip some major revenue sources, including, remarkably, royalty revenues from the oilsands.

Debt servicing this year will cost $2.7 billion, higher than the operating budgets of several ministries.

Bitumen sales, the golden goose of yesteryear, are expected to generate only $1.4 billion in government revenue.

The vast taxpayer-funded debt will hit a total of $115.8 billion this year.


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Kenney will remember, perhaps with some embarrassment, how the UCP used to thunder when the former NDP government’s borrowing was still $30 billion short of today’s heap.

The deficit in the fiscal year ending in March will be $20.2 billion. In the new budget year, it’s expected to be $18.2 billion, every penny borrowed.

It says something about modern Canadian governments that Alberta’s level of debt and deficit, in comparative terms, is still lower than that of several other provinces.

Alberta will shoot for a debt-to-GDP ratio of 30 per cent, finding that level responsible, or at least good enough to keep the debt rating agencies at bay. Nothing would be more disastrous than a big spike in interest rates.

Albertans still aren’t fully adjusted to the costs and dangers of massive debt. In Kenney’s own party, many never will be. Until only eight years ago, the province didn’t borrow at all. It was against the law.

Then came a Progressive Conservative party conference in 2012 where Premier Alison Redford and her finance minister, Doug Horner, let slip that borrowing would reboot.

They were almost squirming with discomfort as that came out. Provincial borrowing had been illegal since 1993, when Premier Ralph Klein decreed the legislated ban.

It made for great politics, but Klein knew as well as anyone that no legislature can constrain the next one.

When the cards began to turn against Alberta, beginning with the financial crash of 2008-09, borrowing became inevitable.

But debt like this? Before the twin curses of the oil price crash and the COVID-19 pandemic, nobody dreamed it would reach such levels.


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And so, Finance Minister Travis Toews said something we’ve never heard in a budget speech before: “A third-party review of the efficiency and appropriateness of our revenue structure will be important in the future.”

That is early code for … Sales Tax! Alberta is once again being lectured all over Canada for continuing to resist a provincial tax despite severely shrunken revenues. Even senior Alberta business leaders now call for serious consideration.

But Toews also said this is not the time. Just about everybody agrees with him. The economic impact of even a small consumer tax increase could disastrously derail economic recovery at this fragile moment.

But the change in tone over new revenue sources — even the hint of a sales tax — is dramatic for a government that fiercely opposes high taxation and considers Alberta’s low rates a point of pride.

The UCP has already lowered the general corporate income tax to eight per cent, the lowest level in Canada and most U.S. states as well.

Toews argues that these tax cuts, as well as reductions to business regulations, have “created a special economic zone, and it’s called Alberta.”

So far, though, the zone isn’t flooding with capital. Even if that starts to happen, there’s little chance that Alberta can bring its finances under control without a steady source of new revenue.

It would truly be remarkable, if Jason Kenney, former president of the Canadian Taxpayers Federation — the very guy who used to scold Ralph Klein on spending — was the one to bring in a sales tax.

He could always say he got stuck in some other government.

Don Braid’s column appears regularly in the Calgary Herald.

Twitter: @DonBraid

Facebook: Don Braid Politics


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