Insights & Analysis

February 21, 2020

Five things to get right in this Provincial Budget

Provincial budgets are more than expense and revenue line items. They are also significant policy announcements and a window into the government’s overall strategy. With the 2019 budget, the Alberta government set out its policy course including four years of forward financial projections. It is a path to a balanced future, with central pillars of reducing taxes, stimulating the economy, and controlling costs.

Because of delays related to the most recent provincial election, it has only been four months since the last budget. For that reason, we do not expect to see a major course correction compared to last fall. The government is set on a path towards fiscal balance and intends to see it through.

READ MORE: Provincial budget sets out pathway to competitiveness

What has changed is that the provincial economy continues to struggle, despite recent efforts to kick-start growth. While we won’t have official numbers until much later in the year, the consensus amongst economists is that the Alberta economy grew by about 0.6% last year – one of the poorest performances in Canada. Making matters worse, the last few months have been especially concerning. Alberta lost more than 34,000 jobs from October to January, including nearly 19,000 in January alone.

A large provincial deficit and a sputtering economy do not leave a lot of room for ambitious new spending commitments or dramatic tax changes. That said, there are clearly both issues and opportunities for the Alberta government in this budget.

Here are five important things to get right.

Economic Opportunity in Climate Policy

The world is shifting to a lower-carbon future. The federal government has committed Canada not only to reaching (or exceeding) its Paris Agreement targets of reducing GHG emissions by 30% from 2005 levels by 2030 but also to achieve net-zero carbon emissions by 2050.

With federal legislation expected to be introduced to that effect, Alberta will need to respond. The future of our resources sector and our economic prosperity are at stake.

At the same time, if we act strategically, addressing climate change while still developing our resources could be an incredible opportunity for Alberta to add value rather than to lose it. We already have the foundation required to make this a reality – Alberta has the right natural resources, a rich inventory of talented and capable people and a history of investing in technology and supporting innovation.

We are, therefore, looking to the provincial budget to further enable efforts to address climate change—and how those efforts can help people around the world meet their own climate objectives. Co-generation, forestry, agriculture, carbon capture, and utilization and more are all strengths. This is an opportunity for Alberta to be a leader on a global scale.

By leading the charge to a net-zero-emissions future, Alberta can become the preferred destination for low-carbon capital investment and, ultimately, to create a new age of opportunity and prosperity for Albertans that is every bit as powerful as the last.

With the 2020 Provincial Budget less than one week away, here are five things we would like to see in the budget. #abpoli #abbudget Click To Tweet

Re-index AISH

The 2019 Budget temporarily paused indexing for Assured Income for the Severely Handicapped (AISH). This program provides financial support and dignity to some of the most demonstrably vulnerable in our society.

Deindexing this program means that as the cost of living in our province increases, the benefits no longer go up by a small amount each year to compensate. As the cost to the province has a relatively small impact on the overall budget, indexing this program should be reintroduced in the 2020 Budget.

Ensuring these disability benefits adjust with inflation would cost around $35 million, or less than one-tenth of 1% of the provincial budget. Effectively this would have no impact on provincial finances but make a serious impact on the lives of vulnerable people in Alberta.

A plan to address youth unemployment

It is no secret that employment growth in the province has been relatively sluggish over the last five years. The province has added 68,500 net new jobs since 2014 – equivalent to an average annual growth rate of just 0.6%.

However, Alberta’s economic struggles have had a disproportionate impact on the province’s youth. In 2019, there were 34,600 fewer employed young Albertans than there were five years earlier – a decrease of more than 10%.

The situation is especially challenging for young men. Since 2014, the number of young employed men has fallen by 27,800, compared to a loss of 6,800 jobs for young women. Alberta. In December 2019, the male youth unemployment rate reached as high as 18.7%, which is the second-highest rate in the country behind only Newfoundland and Labrador. 

Alberta needs a strategy to address this problem. Persistent high youth unemployment means that young Albertans are not only losing out on job experience and economic opportunity but, if left unaddressed, could result in more serious problems like social disengagement, and higher crime and suicide rates.

Solutions to this problem might include provincial government support for training and up-skilling Alberta youth, or adjusting existing programs like the Canada Alberta Job Grant (CAJG) to allow businesses to use the funds to train unemployed, underemployed or low-skilled youth in the province.

A competitive tax environment

Through the MacKinnon Panel report and the following budget, the provincial government is working hard to address the expense side of the provincial ledger. This is important as people want to see their money being spent efficiently before they want to talk taxes.

READ MORE: A competitive tax environment helps build healthy economies

This year, the provincial government should also announce a similar panel to look at the revenue side of the ledger. It’s not about collecting more tax overall; it’s about the fairest and best ways to collect those taxes. We want to see a modern and efficient tax system that rewards investment and growth, is fair to Albertans, and extracts the most revenue possible at the lowest economic cost. Third rails in Alberta like a PST, consumer carbon price and toll roads should all be on the table.

Expand the Alberta economy

Alberta has great strengths in technology, artificial intelligence, advanced agriculture, chemistry, life sciences, transportation and logistics, financial services, aerospace and more. It isn’t a question of growing either our traditional strengths or these newer ones – it should be about growing both. Many of these emerging sectors are adjacent to Alberta’s traditional strengths, and many both support and improve our traditional industries.

One of the most significant and underrated government policy tools is tone, and budgets offer the opportunity to set government tone and show policy support. When we expand the story that we tell about the Alberta economy, the Alberta “brand,” it assists with attracting talent, capital and companies in these new economy areas.

Sectors that develop new technology, process or intellectual property often follow different business models and require a different set of supports than established ones. This budget, the provincial government should indicate a willingness to work with and support these sectors in the ways that will be most helpful to them, and set an overt tone of support for new and emerging economic sectors, in addition to our traditional strengths.

Overall, Alberta needs to reframe our thinking on how we invest in public priorities. New ways of working, machine learning, technology and innovative ideas open the possibility that we can do more, better, and differently. Even in a period of restraint, we can’t just do less with less, we must find efficiencies and opportunities to do better.

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