Political parties love to promise they will balance the budget books, if elected.
Until they don’t.
Despite oil gyrating from just US$28 to more than $110 a barrel in the past decade, Alberta has only posted one budget surplus since 2008, a fiscal unicorn among a team of mules.
This year, we are on track for $6.9 billion in red ink.
That hasn’t stopped promises of fiscal prudence from emerging on the election campaign trail.
NDP Finance Minister Joe Ceci reiterated Wednesday his promise to balance the books by 2023, after the party initially assured Albertans in the last campaign it would post a surplus by 2018.
United Conservative Party Leader Jason Kenney has pledged to return Alberta to a budget surplus within the term of a four-year mandate, if he forms the next government.
For those worried about government deficits, this sounds encouraging.
But University of Calgary economist Ron Kneebone has no confidence that any party can guarantee a surplus will be notched in the next four years.
“I have no idea and, not only that, neither Joe Ceci nor Jason Kenney have any idea,” he said.
“They’re trying to give you a timetable for balancing a budget where one of the major revenue sources is totally unpredictable.”
Kneebone touches on the age-old dilemma for every Alberta finance minister: How do you get off the royalty roller-coaster without breaking a leg?
This year, energy royalties are expected to pump $5.5 billion into provincial coffers, a far cry from the nearly $10 billion that gushed in five years ago when crude prices were sky high.
Yet, the Progressive Conservative government still ran a small $300-million deficit that year.
The underlying issue is Alberta’s revenue stream isn’t consistent enough, leaving volatile oil and natural gas royalties to fill a fiscal gap.
The province also has high spending levels, with the second-highest per capita spending rate in the country, according to the Conference Board of Canada.
A study by the economic think-tank, released earlier this month, paints a gloomy picture of the NDP’s promise to balance the books by 2023.
“The government’s current plan is to continue shrinking the deficit every year until the budget balances in 2023-24. In our assessment, this is unlikely to happen,” it states.
“Our deficit projections differ from the government’s due to our more pessimistic outlook for provincial revenues, which is largely due to our weaker outlook for royalty revenues.”
Alberta still has a strong financial picture with the lowest debt-to-GDP ratio in the country, but it is deteriorating.
Here’s a sobering thought.
The report estimates the province’s net debt will almost triple between 2017 and 2021-22, climbing to $58.6 billion — about $5-billion higher than the province’s latest estimate.
The Conference Board suggests Albertans should look at adopting a sales tax, but that’s politically radioactive in a province wedded to having the country’s lowest taxes.
The report notes recent progress has been made to control spending, but it will be difficult to keep health and education expenditures below inflation and population growth rates for a prolonged period, given the aging of the province.
“We don’t think the revenues are there to balance,” concluded the board’s senior economist Daniel Fields.
“There is still an overreliance on oil.”
Politically, deficits matter to many Albertans.
A poll by ThinkHQ Public Affairs finds 48 per cent of Albertans are very concerned about government debt and deficits, while another 28 per cent are somewhat concerned.
The issue ranks ahead of health care, taxes and education in the online panel poll of 1,196 Albertans that was conducted from March 14 to 17, although it trails concerns about government trust, the economy, pipelines and unemployment.
“It’s a big issue for Albertans as a whole, but it is more of an issue for conservatives,” said Marc Henry of ThinkHQ. “It activates conservative voters.”
The issue certainly activates politicians on the hustings.
Ceci said Wednesday he’s confident in the province’s projections and is adamant Alberta will return to a budget surplus as the economy grows through efforts such as his party’s energy diversification plans.
“We are going to get back to balance, and it is going to be 2023, and we are going to take actions without a PST, frankly, to get there,” he said.
In Lethbridge, Kenney said the UCP will soon unveil a fully costed financial blueprint that will see a balanced budget by 2022-23.
“We can do that if we get the economy growing and better manage spending,” he added, rejecting the notion the plan will require deep cuts.
“We can essentially maintain the current level of spending, finding greater efficiencies.”
Kenney has his own fiscal questions to answer in the coming days.
The UCP has promised to kill the carbon tax and reduce corporate taxes, which will lower government revenues in the short term.
“How is that hole going to be filled?” wondered Travis Shaw, vice-president of public finance with credit rating agency DBRS.
“Alberta has a fairly sizable fiscal hole at the moment that the current government has yet to address in any meaningful fashion, and it remains unclear as to what the UCP approach would be to tackle that as well.”
Ultimately, the issue isn’t whether the winner of the April 16 election can briefly balance the books by the end of the next term and declare mission accomplished.
The question is, how can the government tame a structural deficit and put Alberta on a sustainable financial path that extends well into the next decade — without waiting for high oil prices to come and save the day.
Chris Varcoe is a Calgary Herald columnist.
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