CALGARY, March 4, 2013 /CNW/ - With the 2013 Alberta budget due to be
released on Thursday, and the expected announcement of a large
provincial deficit, Professor Ron Kneebone and Margarita Gres of The
School of Public Policy have produced a 10-year plan for getting the
province's finances back in order.
"Alberta has a substance-abuse problem. The substance is fossil fuels,
and the province has become hooked on the revenues from oil and gas
sales to fund its spending," the authors write.
This reliance on resource revenues has created a large "Budget Gap,"
which is the difference between its spending and all the revenue it
earns not from non-renewable resources. The size of that gap summarizes
just how much provincial government spending on health care, social
services and education is at the mercy of commodity-market swings.
Kneebone and Gres propose that the province stop depending so heavily on
resource revenue and commit to shrinking its Budget Gap from $4,273 per
person (2012) to $1,500 per person by 2023. At that level, spending on
core programs is insulated from unpredictable swings in energy prices.
The authors offer a menu of policy options for reducing the size of the
budget gap. All options must include spending cuts. New revenue,
whether in the form of a sales tax or increases in current tax rates,
cannot on their own achieve the goal of permanently reducing dependence
on uncertain energy revenues. New revenue can only reduce the size of
the spending cuts required to achieve fiscal sustainability.
The authors' analysis includes the implications of introducing spending
restraints on health care, social services and education with and
without the extra revenue made available by increasing the tax rate on
personal income and the revenue from a new provincial sales tax of 3, 6
and 9 per cent.
Government will ultimately decide which combination of measures it
wishes to employ. Kneebone and Gres argue, however, that since health
spending makes up 40% of total spending, and it is currently increasing
at a rate that sees it double every 20 years, controlling health
spending must be part of the solution. Exempting health care from
spending cuts would only be possible with "draconian" cuts to social
services and education of over 30 per cent by 2023.
The report can be found at www.policyschool.ucalgary.ca/publications
SOURCE: The School of Public Policy - University of Calgary
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