Bikman weighs in on budget

Posted on March 12, 2014 by Taber Times

The province will be capping the red pens on the operating side of the 2014 budget announced last week, but a blitzkrieg of borrowed billions in infrastructure spending will be pushing total debt to new heights.

For the first time in six years, the province will be sporting a fresh $1.1 billion consolidated surplus. There will be no new taxes or tax hikes in 2014, and the political hot potato of a provincial sales tax will remain safely underground.

“Obviously a surplus is good,” said Cardston-Taber-Warner MLA Gary Bikman. “It would be better if it (the budget) showed some fiscal restraint and trimming some overhead, as opposed to the revenue change, sort of unexpectedly, through no positive act of our own. That’s just keeping that balance. Obviously a surplus is good, and we’re glad to have that on the operating side.”

Over $1.1 billion has been earmarked over the next three years to assist southern Alberta in flood recovery efforts that devastated parts of the region  in 2013.

But it isn’t all sunshine and roses. Borrowed dollars to fund capital expenditures like roads, hospitals and schools indicate the province will reach $14.5 billion in debt this year, and a projected $21 billion by 2017.

“On the other side of the coin, we’re borrowing, and continuing to borrow to build, under the idea we should borrow at lower interest rates, but it means that by putting money into savings like the Heritage Savings Trust Fund, the government’s argument is we’ll get a better return there by borrowing,” said Bikman. “So we’re borrowing to save — in one sense you can see the logic of that, but on the other hand, it’s still borrowing, and as that accumulates we project about $21 billion (in debt) by the 2016-2017 budget.”

Bikman would prefer to see the government chart a more fiscally responsible course, and achieve goals through sound fiscal management rather than excessive borrowing.

“The interest on that of course is rather large, using Minister Horner figures of four per cent borrowing, interest on $21 billion is $840 million. So a lot of money. You could be building multiple schools and hospitals simply on the interest alone. So if you compare the bottom line on the budget, you still see that we could be doing the things that we need to to do, to build without borrowing.”

Alberta has seen deficit budgets since the global economic downturn in 2008, which axed provincial royalty profits from volatile resources like oil and natural gas. Through a succession of budgets, long-term debt has been avoided by whittling away $17 billion from the province’s short-term savings.

“We’re adding to the debt, which means future generations are going to pay for things. Well, the argument is future generations are going to benefit from it,” said Bikman. “We say true enough, but if your fiscal house is in order and you’re actually living within your means and we’re in a resource-based economy — if we’re projecting $7 billion of revenue for the coming year at the last budget, and it ends up being over $9 billion, whatever the actual numbers were, they act as if they were so smart, or they did this because they were so frugal.”

Total revenue is forecast at $44.4 billion, with total operational expenses ringing in at $38.5 billion, with overall spending up 3.7 per cent over last year. Non-renewable resource revenue is pegged at $9.2 billion, just under seven per cent higher than the 2013-2014 budget.

“We need good roads, we need good schools, we need good infrastructure, and it needs to be maintained. But our government has a history of cutting at the delivery end — cutting at the people’s end — of roads, schools and hospitals, instead of cutting at the top and trimming down, and designing true tendering processes that are open and transparent,” said Bikman.

Total savings are expected to be $23.9 billion by the end of the 2014-2015 fiscal year, and $26 billion by the end of 2016-2017. Bikman noted that in an economy largely based on non-renewable resource revenue, the province should be saving a lot more of Alberta’s royalty revenues for future generations.

“There are lots of good intentions in this budget, and I don’t think we should ever deny the fact that the government wants to do a good job and wants to do good things for people, providing more money, more scholarship endowments, and more money for the health care system. Naturally, we applaud that aim and that goal. But we’re not sure that the way that they’re choosing to accomplish those things is necessarily in the best interests of all Albertans, especially going forward. I think it’s critical, in a resource-based economy, that we’re not living and depending totally on the revenue stream of the resource. There’s a significant portion of that that needs to be saved every year and the interest allowed to accumulate, and compound.”

Dollars have been set aside to fund 40 new RCMP officers for the province, 50 new schools and 2,000 spaces for post-secondary students.

Highway 63 twinning to Fort McMurray is on track for a 2016 completion with a $691 million investment over the next three years, while 2,500 kilometres of existing provincial highways have been slated for rehabilitation.

Adamant that the province is doing the right things the wrong way with regard to financing infrastructure and growth demands, Bikman accused the Redford PCs of attempting to buy votes with borrowed billions.

“I don’t mean to sound negative — we were hopeful. We think that the government truly wants to do good things, we just think that they’ve abandoned some sound fundamental principles of management, and they’re still continuing to do things that we think are the kinds of things that governments use to buy votes or curry favour. The things that they’re doing need to be done, they just need to be done in a fiscally prudent way.”