Today was budget day in Alberta. Budget 2015 is being called “a bad news budget” but it could have been much worse. There are tax and user fee increases, cuts to spending (including the first cut to health spending in 20 years), and a new “Health Care Contribution Levy”, and still Alberta’s deficit will grow, to a record $5 billion this year. On the other hand, infrastructure spending seems to be mostly intact, programs for the most vulnerable have not been cut, Alberta retains its tax advantage, and the Province is taking some baby steps toward getting us off the energy price roller coaster. Here is Dave’s take.
There’s a lot of truth to the “government town” label that people often apply to Edmonton, so any Provincial cuts are going to have an impact. According to the City’s chief economist John Rose, 22% of Edmonton’s employment is related to health care, education, or public administration.
Still, Rose said in recent weeks that Edmonton as a whole would weather the storm better than others in Alberta. From his Labour Force Report issued on March 13:
“Although the impact of lower oil prices is evident in some sectors, the diversity and depth of
Edmonton’s economy has insured that employment continues to grow in Edmonton and that the
City remains a very attractive location for those seeking new opportunities.”
So what does Budget 2015 mean for Edmontonians and for Edmonton?
Here are some of the key takeaways from the budget that I think are relevant to Edmonton:
- For 2015-2016, Alberta Health Services (AHS) faces a decrease of $286 million or 2.1% and will need to cut nearly 1,700 positions
- The budget includes $926 million in capital spending for health-related “capacity expansion projects” in Calgary and Edmonton
- There is $50 million over at least two years to renovate emergency rooms in Calgary and Edmonton (specifically the Misericordia, Grey Nuns, and Royal Alexandra hospitals)
- The budget promises than 300 new restorative care beds in Calgary and Edmonton
- Post-secondary institutions face $114 million in cuts
- Campus Alberta institutions (which includes the University of Alberta) are facing a 1.4% operating grant reduction in 2015-2016 and a 2.7% reduction in 2016-2017
- School boards will receive no money for more students and must cut 3% from non-instructional costs
- The Province says that “most” school projects announced in 2013 and early 2014 will open in 2016-2017
- Family and Community Support Services, which helps to fund more than 60 agencies and 80 programs in Edmonton, will be maintained at $76 million.
- Funding for police remains the same
- Capital spending of $1.1 billion for the next 5 years includes $124 million for NAIT expansion and $120 million for NorQuest downtown
- GreenTRIP funding remains intact, which means the first portion of the Valley Line LRT will continue to move ahead
- MSI funding will remain stable, even if it is more of a loan than a grant
- The smart fare proposal from Edmonton, St. Albert, and Strathcona County is still “under consideration”
- The budget contains no funding for the proposed Galleria project
Certainly the health care sector is going to take a hit and that will have some impact on Edmonton. The Province maintains that we can get the same quality of service for less, while critics disagree and suggest the effect of this budget won’t be felt only by those at AHS who lose their jobs but also by Edmontonians in need of care. “The time has come for us to start looking at how we can do things in a more efficient manner,” said Health Minister Stephen Mandel. “I don’t think Albertans should have to pay 20 and 30 per cent more for things.”
In addition to the cuts in health-related spending, the budget also introduces the Health Care Contribution Levy, which will apply to individuals with taxable income greater than $50,000 per year. There’s a sliding scale from $200 to $1000 depending on your income bracket. This tax takes effect on July 1, 2015, and applies to roughly 1.1 million Albertans.
The health-related surprise though was money for hospitals, especially given recent suggestions that Edmonton facilities need more than $225 million in maintenance and repairs. The previously announced funding for emergency room upgrades will help in that regard.
It’s not clear how many cuts the education sector will face, but clearly the 3% reduction is going to have an impact. A lack of new funds to deal with growth will likely also mean larger class sizes. At the post-secondary level the cuts are much smaller than many expected.
While there is no provincial sales tax, there are increases to personal income taxes. If you make more than $100,000 per year your tax rate will increase from 10% to 11.5% (phased in over three years) and if you earn more than $250,000 your tax rate will rise to 12% when fully implemented (Edmonton’s media family income is about $100,000). We know that nearly 10,000 employees of AHS earn at least $100,000 a year, which means if they aren’t among the job cuts, they will face increased personal income tax. Though it likely won’t be those who make the most that face the cuts. According to the Herald, Mandel’s own department will spend 18% more than last year.
For most Edmontonians, increased taxes, fines, and user fees will be felt immediately. Gas taxes are increasing by 4 cents to 13 cents per litre. Cigarette taxes are increasing by $5 to $45 for a carton of 200. A bottle of wine or spirits will cost 16 cents more, and a 12-pack of beer will cost 90 cents more. Fines for speeding and other traffic offences are increasing by an average of 35%. Marriage licenses are increasing by $10 as are birth and death certificates.
There is some good news for the most vulnerable Edmontonians. There will be no reductions to child care subsidies for low-income families, nor are there any reductions to the Alberta Seniors Benefit income support. The budget will also accommodate growth for AISH and Persons with Development Disabilities. Starting July 1, 2016 there will also be a new Alberta Working Family Supplement refundable tax credit on earnings up to $41,220. Funding for FCSS, which supports many Edmonton agencies, will be maintained.
On infrastructure there’s mostly good news. Or at least a sigh of relief that important projects will continue moving forward, like the Valley Line LRT which the Province previously committed to.
Responses to Budget 2015
From Mayor Don Iveson:
“The city of Edmonton and Alberta municipalities faired reasonably well on this budget, all things considered – certainly compared to what we all heard and were concerned might be coming,” Iveson said.
“The numbers are fairly small and speaking to our chief economist just now, it may have a small effect on Edmonton’s growth, but we’re talking a decimal to Edmonton’s GDP, not a side-swipe,” Iveson said.
“We can work with the dollars provided,” said Iveson.
From Doug Goss, char of the University of Alberta’s board of governors:
“The message is clear — we all have to find new ways of doing business, we have to be a little more creative,” said Goss.
From Indira Samarasekera, President of the University of Alberta:
“This is a very good outcome,” said Samarasekera, “much better than many were expecting. The provincial government is facing financial pressures, but they’ve demonstrated they understand the importance of post-secondary to Alberta’s future.”
President Samarasekera will address the campus community at a forum on March 31.
From Michael Janz, Edmonton Public School Board chair:
“We’re going to see more students arriving at the school doorsteps with no new money provided to educate them,” he said. “I don’t think this is a good news budget for Edmonton public schools.”
From Marilyn Bergstra, vice-chair of Edmonton Catholic Schools:
“The budget cuts will make it increasingly difficult to support all of our students, particularly our most vulnerable, as well as the new students that are coming to our district,” she said.
From Helen Rice, President of the Alberta Urban Municipalities Association (AUMA):
“Sufficient funding for infrastructure is vital to address the deficit that has continued to grow across the province, and to provide for new infrastructure requirements to meet our obligations to citizens,” said Rice.
“Given the current economic climate, now is the time to secure funding to meet infrastructure needs when prices are falling and the availability of resources to work on projects is increasing,” said Rice.
The reaction from the business community appears to be more mixed.
Budget 2015 Details
Here are all the budget-related news releases:
- Budget 2015 sets a balanced direction for Alberta’s future
- Alberta to fix fiscal foundation
- Budget green light for roads, schools, hospitals and facilities
- Patient care protected while lowering health spending
- Helping child and adult students achieve their potential
- Vulnerable Albertans protected in Budget 2015
- Supporting families and communities a budget priority
- Efficient spending supports economic growth, diversity
Here is the budget presentation from Robin Campbell, Minister of Finance: