Albertans living beyond their means

February 10, 2010

By Stephen Murgatroyd
Troy Media

Dr. Stephen Murgatroyd
Dr. Stephen Murgatroyd

EDMONTON, AB, Feb. 10, 2010/ Troy Media/ — It is a fundamental fact that Albertans are not paying their way for the services they receive from their government.

If not for the revenue the province raises from the energy sector, the province’s deficit this year would be approaching $12 billion.

Let’s look at the 2010 budget, released yesterday, by first stripping away the $7.3 billion in revenue the province expects the industry to produce in 2010 and 2011.

Tax and other revenues, minus the industry take, would be $26.7 billion, instead of the $34 billion the government is forecasting. Of this $26.7 billion, the province will spend just under $15 billion on health care, which works out to 56 per cent. If we add in compulsory education, some 79 per cent of our base revenues will be spent. Now add in post-secondary education and innovation and we are now at 90 per cent of our base revenues.

One pot of revenue

But this is not how the Alberta government looks at it: it sees only one pot of revenue – money raised from the base (that is, all Albertans) and money raised from the oil and gas sector, for a total of $34 billion.

Unfortunately, that is the figure it uses to fund programs and services, unfortunate because there is a problem with the reliability of oil and gas revenues: They depend on global prices and the decisions made by people outside of government – private companies.

Under the government’s own revenue figure of $34 billion, health care takes up 44 per cent and, within five to seven years, will pass the 50 per cent mark. The government justifies this ever-increasing expenditure by pointing a finger at Albertans who they say tell them to invest “what it takes” to run health care, which is rather like asking an obese teenager whether they would like another hamburger. No one has bothered to explain to Albertans that there are consequences to having health care eat up more and more of the provincial budget, consequences such as the closing one of our Colleges, cutting more social and cultural programs, and abandoning commitments to the homeless. Rather, health care is treated as if it is an unstoppable force.

The government is sacrificing Albertans long-term interests for its own short-term gain. The long-term interest requires Albertans to both increase access to, and the affordability of, post-secondary education so that the province will have more people in its workforce with the skills to adopt, adapt and respond to innovative opportunities. The long-term view would improve the work of schools as key to the province’s future – securing more high school completion, enabling more young people to qualify for access to post-secondary education: In other words, improving performance across the board. By allowing the bulk of its revenues to fund health care, the province is reducing the affordability and capacity of its post secondary institutions.

In real terms, spending on education in schools is also reduced. While the budget makes it look like there is an increase in spending – $43 million of “new money” (0.7 per cent of the education budget) – this will quickly be eaten away by the decision not to directly fund mandated pay increases for teachers and not to provide funding to account for inflation, now running at 1.3 per cent but expected to rise during the year.

Education, both at K-12 and post secondary, is critical to Alberta’s future. It is the underpinning of any strategy to really diversify the economy, build jurisdictional advantage, and make it possible for our firms to compete against players who have ready access to larger markets and a more venture capital.

For Alberta to be successful in the middle of this century it needs to double the number of people working in firms who have post-graduate degrees, increase its investments in lifelong learning and encourage more entrepreneurs to see learning and investment in productivity skills as key to their future. In this sense, educational investments are exactly that: investments in future prosperity.

Health care spending, on the other hand, is consumptive spending. Because Alberta is prosperous – it has one of the highest GDP’s per capita in the world – it spends because it can.

A big bet

By moving resources away from education to health the government is making a conscious choice to favour the present over the future. By reducing in real terms its commitment to post secondary education and holding the line on spending in K-12, it is willing to risk the future well-being of the economy in favour of health care and its attempt to “buy votes”.

At some point the tension between consumption and investment becomes real. This is when, in order to fund continued consumptive spending, the Government has to make tough choices about investment – closing a Community College, privatizing a University or increasing tax revenues to pay for continued consumption and investment. The “bet” being taken by the Government of Alberta is that this “tipping point” is some ways away. It’s a big bet.

Alberta is in the fortunate position of being able to do anything it wants. But it can’t do everything it wants. Choices have to be made. One way to ensure better choices are made is to ensure that Albertans understand that they are not paying for the services they are demanding.

Channels: Didsbury Review, February 16, the Calgary Beacon, February 23, 2010

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