ALBERTA— The provincial government released the Alberta Budget 2021 Thursday (Feb.25) and three key takeaways are clear— Deficit, debt and recovery from COVID-19.
The province is estimating a deficit of $20.2 billion for 2020-21 and a $18.2 billion deficit for the 2021-22 fiscal year.
The budget does not include any tax increases, but taxpayer-supported debt is estimated to total $98 billion at the end of 2020-21 and $115.8 billion at the end of 2021-22. Consolidated debt servicing costs are estimated to be $2.8 billion in 2021-22, and debt servicing costs on taxpayer-supported debt are projected to be $2.3 billion in 2021-22.
“Albertans continue to face one of the most difficult times in our history. Budget 2021 is focused on what matters most— Protecting lives and livelihoods,” reads Budget 2021. “As we head into the second year of the fight against the COVID-19 pandemic, Alberta still faces a long road to recovery. While vaccines offer hope, it will be several months before there is widespread immunization in the province. Our health care system will remain under pressure and so will the economy.”
The province is facing a tremendous amount of uncertainty right now and this is reflected in Budget 2021, said Airdrie-Cochrane MLA Peter Guthrie.
“It’s showing that we still have to support our health care system. It’s not by any means an austere budget,” Guthrie said. “We’ve lost a tremendous amount of revenue."
Three fiscal anchors have been put forward by the Minister of Treasury Board and Finance Travis Toews— A key metric is to ensure the net debt to GDP ratio remains below 30 per cent. The ratio is estimated to sit at 24.5 per cent for 2021-22, and 26.1 per cent for 2022-23. The net debt to GDP ratio was budgeted at 14.2 per cent for 2020-21 but is estimated to reach 20.3 per cent.
Toews' other anchors include aligning spending in Alberta with comparable provinces and establishing a path to a balanced budget.
“As soon as we can put COVID behind us, that means getting down that vaccine trail a little bit further, you will be seeing the Minister come out with that path to balance— Those three key fiscal anchors,” Guthrie said.
The budget notes Alberta’s economy was hit especially hard in 2020 due to the “dual shock” of COVID-19 and the collapse of oil prices.
“We’re not in a normal operating condition right now," Guthrie said “Once we get through the short-term pains of COVID we’re going to have some good things to look forward to on the horizon.”
The province has forecasted $5.8 billion will be needed to address the province's COVID-19 pandemic response and recovery in 2020-21. As part of the fight against COVID-19, an additional $1.25 billion in contingencies has been set aside specifically for costs associated with the pandemic. This includes extra health care system capacity, treatment, personal protective equipment, contact tracing, testing and vaccine administration.
An additional $500 million in contingency has been earmarked for Alberta's Recovery Plan and $750 million has been established for disaster relief if needed.
Alberta’s Recovery Plan was laid out on June 30 and is included in the budget. Further funding has been allocated for the initiative and $18 million for additional actions is included in Budget 2021. The recovery funding is under the Department of Jobs, Economy and Innovation and still under policy development.
In 2021-22 the province will be spending $3.1 billion to support economic recovery and growth. Included in these plans are a technology and innovation strategy, tourism recovery plan, aviation, aerospace and logistics strategy, pharmaceuticals and life science strategy, energy strategy, finance and financial technology strategy, agriculture strategy and others.
The reduction of the corporate tax rate to eight per cent is also expected to help foster business growth in the province when COVID-19 ends, Guthrie said. Alberta will have one of the lowest tax rate jurisdictions in Canada or the United States and this will encourage investment.
Budget 2021 includes $5.9 billion over three years to support Alberta communities’ local infrastructure projects, which in turn is designed to help to fuel job growth.
Direct financial support to municipalities, which includes both provincial and federal funding, is forecast to average about $1.9 billion per year from 2021-22 through to 2023-24. Budget 2021 includes $5.9 billion over three years for Alberta municipalities' local infrastructure projects including roads, clean water infrastructure and public transit.
One of the key sources of funding for municipalities is the Municipal Sustainability Initiative.
The Initiative is set at $1.2 billion for 2021-22. The funding will be reduced to $485 million in 2022-23, $485 million in 2023-24 and $722 million in 2024-25. Overall, the Municipal Sustainability Initiative will face a 25 per cent reduction over the next three years.
The changes to the Municipal Sustainability Initiative funding were forecasted for a long time, Guthrie said, explaining there was a need to see a reduction in spending. He noted, the funding has been front-end loaded to benefit municipalities in 2021.
“We want to make sure that municipal leaders have an opportunity to stimulate the economy early on when we need it,” Guthrie said. “We want to be able to meet that goal of putting Albertans back to work and providing support at this time.”
After the budget was released Cochrane Mayor Jeff Genung was able to speak with Minister of Transportation and Minister of Municipal Affairs Ric McIver Thursday evening.
“He gave me a rundown of the high points of the budget and assured me the 1A and 22 was indeed in there," Genung said. “It feels good to have it right from the province that it’s [Highway 1A and 22] in there.”
Genung was also pleased to see that the province has not changed the funding for Cochrane Family and Community Support Services. He noted library funding and educational property taxes also remain unchanged.
Budget 2021 will have a limited negative impact on Cochrane, aside from a reduction of Municipal Sustainability Initiative funding.
The Town receives a significant amount of funding from the province and the Municipal Sustainability Initiative serves as a vehicle to support infrastructure projects in Cochrane. Genung cited the Jack Tennant Memorial Bridge as an example.
The Town has a 10-year Capital Plan that is used to guide and develop a financial strategy for infrastructure projects. The Town will now need to revisit the plan and reallocate and refine where dollars will come from for projects in light of Budget 2021.
“With the pandemic, the price of oil and the state of our economy in general, we can’t continue to do things the same way,” Genung said. “It wasn’t a shock and the province has been fairly clear that they were going to make a change to MSI [Municipal Sustainability Initiative].”
