Vice tax hikes pay part of the new ‘Alberta way’

Vice tax hikes pay part of the new ‘Alberta way’
Photo courtesy of the Government of Alberta.

The “Alberta way” includes billions more for roads, schools and hospitals but will not break even before 2019-20.

Drinking, smoking and driving, on the other hand, will cost you more immediately.

The province’s New Democrat government tabled its first budget Tuesday, laying the groundwork for “a stronger, diversified economy” by spending $4.5 billion more on infrastructure, reversing frontline public service cuts and stimulating job growth, according to Finance Minister Joe Ceci.

“This government is working towards a vision of a province that is more prosperous – and whose prosperity is much more widely and fairly shared,” he said.

Ceci bucked the tradition of buying a new pair of shoes on budget day, choosing instead to put his late father’s work boots on display.

He said the 2015-16 budget would repair the public service and do a lot of construction.

The $4.5 billion boost represents a 15 per cent increase in infrastructure spending this year, part of a five-year, $34-billion capital plan that includes $3.8 billion for schools, $4.7 billion for roads and bridges and $4.4 billion for “new projects and programs that will be considered based on transparent and accountable criteria.”

A two-year job creation incentive of $5,000 per business per new job is expected to support 54,000 new jobs by 2017, and the government intends to take “new measures” to improve access to capital funding for small- and medium-sized businesses (SMEs).

The budget speech also mentioned the creation of the Ministry of Economic Development and Trade announced during a cabinet shuffle in late October.

Ceci said the budget deficit this year will be about $6 billion and is projected to balance in 2019-20, a year later than the New Democrats promised during the election campaign last spring. He pointed to pressure on government revenues created by low international oil prices.

Stabilizing the patient

According to the government, Alberta’s Budget 2015 stabilizes the healthcare system with predictable funding while planning to control annual increases. The plan is to spend $19.7 billion on healthcare in 2015-16, $20.4 billion next year and $20.9 billion the year after.

The budget earmarks $10 million per year for mental health. Investments of $120 million and $90 million respectively for new long-term care spaces and homecare expansion have been back-loaded to 2016-17.

Investments in education are projected to be $7.6 billion, $7.9 billion and $8.1 billion in the next three years, respectively, adding 380 teachers and 150 support staff to Alberta schools, increasing supports for students with special needs and creating a new school nutrition program.

Now enjoying a two-year tuition freeze, more than 60,000 post-secondary students will also receive $228 million in scholarships and grants. Funding for the post-secondary system is expected to increase to $6 billion in 2018-19.

The New Democrat government is also spending on families, with a new Alberta Child Benefit, an enhanced Alberta Family Employment Tax Credit (AFETC) and more support for people with disabilities, child intervention, child care, and those experiencing homelessness, and new annual funding of $15 million for women’s shelters.

Paying for virtue with vice

Vice taxes will be going up starting this fiscal year, providing an additional $1.5 billion in 2015-16 and approximately $2.3 billion per year for the next two fiscal years. That includes a $5 increase to a carton of cigarettes, a five per-cent increase to the liquor markup, a four-cent increase to the locomotive fuel tax and a one-per-cent increase to insurance premium tax rates.

The new “Alberta way,” as Ceci phrased it in his budget speech Oct. 27, means keeping spending increases to two per cent per year for the next four years and freezing the salaries of cabinet ministers and MLAs and their political staff for the term of the Legislature.

Government revenue is projected to grow by six per cent per annum over the same period.

It also means growing the economy outside the oil patch and saving.

“Alberta needs to reduce our vulnerability to price shocks over which we have no control,” Ceci said as he tabled the budget. “We must do this by saving for a rainy day; by diversifying our economy; and by getting the maximum possible value out of the development of our energy resources – resources that belong to the people of Alberta.”

Ceci promised “hiring restraint” across the public service, a “comprehensive review” of Alberta’s arm’s-length agencies, boards and commissions and legislation that would prevent the province from borrowing more than 15 per cent of GDP, a threshold the Dominion Bond Rating Service warned would put the government’s AAA-stable credit rating in jeopardy if exceeded.

Wildrose calls budget ‘risky’

The budget is “plagued with risky economic theories, fantasy five year projections, (and) record deficits” according to a statement from Wildrose Party.

The Official Opposition warned the NDP budget comes with a “stunning” $26.8 billion deficit over the next three years, measured as a total drop in net financial assets. This will bring Alberta to a record $47.4 billion in debt by 2019.

The party claims interest on the debt will cost as much as the departments of Aboriginal Affairs, Status of Women, Service Alberta, Seniors, Jobs, Skills, Training and Labour, and the Legislative Assembly of Alberta combined.

“The long decline of the Alberta Advantage continues under this budget,” Wildrose Shadow Minister of Finance Derek Fildebrandt said. “Albertans do not need ideological experiments with new corporate welfare bureaucracies and a debt ceiling that will exceed $47 billion, but a common-sense plan to get spending under control, protect jobs and return to fiscal sanity.”

The party reported Wednesday that Moody’s released an update to markets saying Alberta’s planned steep debt increase will be credit negative.

“DBRS Limited also commented on the record-level of debt that will be accumulated under the NDP saying the plan will, ‘exhaust flexibility within the current ratings,'” the party said in a press release.

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