Program spending key to balancing Alberta budget: Fraser Institute

Report says tax reform to regain the province’s former advantage across North America should be a priority

Program spending cuts of 10.9 per cent over the next three years would balance the Alberta budget by 2021-2022, says a report released on Thursday by the Fraser Institute, a public policy think-tank.

The cuts would be significant but the organization said it is substantially smaller than the reductions implemented by the government of Ralph Klein in the 1990s. It would also bring Alberta’s per-person spending closer into line with neighbouring British Columbia, which spends 21 per cent less per person than Alberta does.

Ben Eisen

“Eliminating the deficit quickly and pursuing tax reform to regain the province’s former tax advantage across North America should be a priority for the Alberta government,” said Ben Eisen, Fraser Institute senior fellow and co-author of A Spending Framework for Alberta: Balancing the Need for Deficit Elimination and Tax Reform, in a news release.

“Given Alberta’s dire economic situation, its fiscal policy needs to be focused on creating the conditions for prosperity, which means eliminating the deficit but also, importantly, regaining competitiveness to attract entrepreneurs, investors, and business owners.”

The report said Alberta’s fiscal situation has been deteriorating rapidly, with the province going from a $31.7 billion net financial asset position in 2008-09 to having $28.1 billion in net financial debt this fiscal year. This is a total net asset decline of $59.8 billion. All this new debt is leading to higher debt service costs. It’s estimated that the province’s once negligible debt servicing costs will hit $435 per person by 2018-19, reducing the province’s ability to fund important priorities. This highlights the importance of returning to budgetary balance sooner rather than later, it said.

The study is part of a new book Alberta Prosperity: A Plan for Opportunity and Growth, which explores policy reforms in Alberta’s finances, the health-care and education systems, the investment climate and resource regulation, among others.

“Alberta no longer leads in several critical policy areas, which is a marked departure from just 10 years ago,” said Jason Clemens, executive vice-president of the Fraser Institute. “This new book provides policy-makers with a clear plan to restore the province’s finances, improve competitiveness and raise living standards for Albertans.”

Mario Toneguzzi is a Troy Media business reporter based in Calgary. He writes for Calgary’s Business.

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