Ten considerations for the next Alberta budget

On November 17, the working group of the Alberta Alternative Budget (AAB) sponsored a one-day workshop at the University of Alberta. The event’s main purpose was to discuss recent developments in Alberta public policy, as well as expectations for the upcoming Alberta budget. Twenty speakers presented in total.

In light of what was discussed at the event, here are 10 considerations for the upcoming provincial budget:

1. Governments often face pressure to privatize important public services—yet, privatization sometimes comes with its own costs. According to my long-time social policy mentor Allan Moscovitch, privatization “refers to the movement from public to private service delivery.” Governments of all stripes typically want to reduce the short-term cost of delivering important services. However, privatizing important public services can result in higher costs of services, reduced quality of services, and a deterioration in working conditions. For example, during her presentation, Hitomi Suzuta noted that public long-term care facilities (operated by Alberta Health Services) provide approximately four hours of direct care per senior in a typical day, while for-profit facilities in the long-term care sector provide just three hours of direct care per day (for more on this, see this recent report by David Campanella).

2. Provincial funding needs to account for demographic changes. In his presentation, Jonathan Teghtmeyer noted that, since 2009-10, the number of students attending K-12 schools in one of Alberta’s public, separate or francophone school boards has increased by 18% (as a result of both high birth rates and high rates of in-migration to Alberta). During this same period, approximately 3,000 new teachers were hired—but according to Jonathan’s research, Alberta would have needed 6,000 new teachers in order to maintain the previous teacher-student ratios.

3. Inflation erodes the value of funding, and new funding levels need to reflect this. During our workshop, John Kolkman noted that, since the election of the NDP government of Rachel Notley in 2015, there’ve been no increases to social assistance benefit levels.[1] Yet, during this time, there’s been roughly 4% inflation—that means that the value of annual benefits received by Alberta’s social assistance recipients has decreased by this same amount. Considering that a ‘single employable’ adult on social assistance in Alberta (without dependents) receives approximately $8,000 a year to live on, such an erosion in annual income can make life challenging. (For a recent overview of inflation in Alberta, see this November 2017 piece. And for an overview of social assistance in Alberta, see this blog post.)

4. When it comes to annual spending by Alberta’s provincial government, there’s potential for cost savings. In the K-12 education sector, the Alberta government gives $263 million annually to private schools—yet, not everyone considers this to be money well spent. Speaking at our workshop, Barb Silva noted: “Many Albertans have no idea that private schools in their province receive public funding.” And in the homelessness sector, it’s well known that targeted spending on affordable housing can reduce public spending in other sectors, most notably the health and justice sectors.

5. In order for crucial public services to be financed in Alberta, there’s a need for tax reform. During his presentation, Nathan Jackson (an Edmonton-based economist) noted that Alberta is the only Canadian province without a provincial sales tax; he also suggested that Alberta introduce one (along with a rebate for low-income households). This, he argued, could help stabilize provincial revenue. A 5% provincial sales tax (with rebates for low-income households) could result in more than $4 billion in additional annual revenue for the province.

6. Gender matters. In her presentation, Angele Alook stated that in communities where there’s a lot of resource extraction, there are high rates of violence against women. She also noted that, in those communities, most of the high earning jobs in those sectors go to men. Perhaps not surprisingly, Alberta has the highest gender income gap of any Canadian province. It should also be noted that Alberta has yet to introduce pay equity legislation.

7. Alberta not only needs more jobs…it needs more ‘good jobs.’ It’s important to discuss the quality and cost of public services delivered. But it’s also important to remember that the workers who deliver those services often need to raise families and maintain healthy lifestyles themselves. Wages need to be in line with Alberta’s high cost of living, and job security matters. In his presentation, Christopher Smith discussed wages in Alberta’s early childhood education sector. He noted that the average worker in this sector receives an hourly wage somewhere in the $16-$23-per-hour range. (Of course, the Notley government’s move to increase the minimum wage by nearly 50% over four years is consistent with a move toward higher-quality jobs.)

8. Not every community in the province has the same needs. For example, Medicine Hat’s municipal government is in an exceptionally sound fiscal position. On a per capita basis, its annual revenue is more than six times the average for a Canadian municipality. Medicine Hat’s municipal government owns several public utility companies (something that’s quite unusual for a Canadian municipality). It owns both an oil exploration company and a gas exploration company. And it owns more than 4,000 gas wells. All of this is very good for the city’s bottom line, allowing it to have lowest utility costs in the province (and all of which contribute to Medicine Hat having a relatively low cost of living). This also makes it relatively easy for Medicine Hat’s municipal government to donate land for the purposes of subsidized housing—typically, the donated land covers one-third of the capital cost of new subsidized housing. (The dynamic whereby some governments having more resources than others at the same level is sometimes referred to as a horizontal fiscal imbalance.) Perhaps not surprisingly, Medicine Hat has very little homelessness relative to other municipalities; by contrast, there are more people experiencing homelessness in Calgary than there are in the rest of Alberta combined (a point made by my colleague Victoria Ballance during her presentation).[2]

9. Good public policy needs to be well-funded, but regulation matters too. In his presentation, Christopher Smith noted that, when it comes to child care, Alberta has regulated spaces for just one in three children aged 0 to 5. In her presentation on long-term care, Hitomi Suzuta recommended that the Alberta government introduce regulations for supportive living facilities stipulating minimum staffing requirements. And in his presentation, Ian Hussey noted that the Notley government has announced the ‘phase out’ of coal-powered electricity production (by 2030) and that this will come with compensation for the plant owners, as well as a $40 million transition fund for coal sector workers.[3]

10. Even in the context of discussions about Alberta’s provincial budget, the role of federal government remains crucial. Social spending in Canada often relies on federal leadership and cost-sharing with other orders of government. For example, during her presentation, Victoria Ballance noted that Alberta, along with all other provinces and territories, receives funding on an annual basis from Canada’s federal government to operate existing social housing units (mostly for low-income tenants). This funding does not simply cover the mortgages; it also helps with the ongoing operating costs—that is, the difference between the rent received from tenants and what it actually costs the housing provider to keep the units in a decent state of repair. Funding agreements, which typically last between 35 and 50 years, have already started to sunset and are scheduled to end altogether in 2039. Fortunately, on November 22, Canada’s federal government unveiled its much-anticipated National Housing Strategy which, among other things, announced a 10-year plan to preserve the affordability of those units (the plan requires provincial and territorial cost-sharing). This federal plan was excellent news for social housing providers across Canada!

In Sum. As the Notley government prepares to release another provincial budget, Albertans need to be mindful of the many layers of analysis required to properly assess the document. With that in mind, our November 17 workshop helped shed light some of the wrinkles involved in a provincial budget. My hope is that this November workshop, held on the eve of the Parkland Institute’s annual conference, becomes an annual event.

I wish to thank the following individuals for assistance in preparing this blog post: Laurie Adkin, Angele Alook, Sandra Azocar, Victoria Ballance, Carolyn Blasetti, Dave Campanella, Ian Hussey, John Kolkman, Lindsay Lenny, Mel McMillan, Rick Mueller, Nathan Jackson, John Kolkman, Michael Parker, Jenn Prosser, Barb Silva, Christopher Smith, Garry Sran, Hitomi Suzuta, Jonathan Teghtmeyer and Trevor Zimmerman. Any errors are mine.

[1] Specifically, he noted that since 2012 benefit levels for Alberta’s ‘big three’ income support programs haven’t increased (representing a 10% loss in their real value during this time). He was referring to Assured Income for the Severely Handicapped, Income Support, and the Alberta Seniors Benefit program. He also noted that income thresholds to qualify for child care subsidies were last increased in 2012.

[2] For more on how homelessness differs across Alberta communities, see this web link.

[3] The funding will ‘top up’ Employment Insurance benefits to 75% of a worker’s previous earnings. It will also provide some post-secondary education assistance and training. Approximately 2,000 workers will be affected.