At the end of last month, the UCP government released their first quarter fiscal update for their 2022–2023 budget year, and as I predicted last month, they increased their projected surplus.
Almost a month ago, I posted the following on Facebook. (I posted something similar on Twitter, too.)
When the UCP released their 2022–2023 budget back in February, they predicted a $515 million surplus. But as I pointed out in that Facebook post, that was based on a forecast of West Texas Intermediate being at $70 a barrel.
And that’s interesting given that the price of oil was already approaching $90 a barrel by the time the budget was released and hadn’t been anywhere near $70 a barrel since mid-December. Plus, it had been on the rise that entire time.
Since that time, WTI had hit $120 a barrel, stayed above $100 a barrel for about 5 months—more or less— and even in August, it still hovered around the $90 a barrel mark.
And as I predicted, the UCP have readjusted their forecast. As of last week, they are planning on a $13.2 billion surplus, which is a handy thing to have when we’re only 6 months (give or take) out from the next provincial election.
A budget surplus is certainly something the NDP didn’t have heading into the last election. They did have a promise of a surplus years down the road though.
Granted, none of that will matter come election time. The UCP will tell everyone that they built a surplus, something the NDP wasn’t able to do. And they’ll probably leave out the fact that it’s entirely because of high oil prices, not because they are good money managers.
Although, the UCP will claim that the surplus was because they cut spending.
In fact, Jason Kenney, the premier of Alberta, recently said as much in a recent video he posted to social media.
At one point, he said:
Fundamentally, we never would have had a balanced budget on the books has it not been for getting our spending under control.
Let’s look at that, shall we.
In 2018–2019, the NDP government spent $48.264 billion in operating expenses between the 19 different government ministries. That was the last budget passed by the NDP.
With the recent first quarter fiscal update, the UCP government plans to spend $51.252 billion in its final budget of its first term. That’s an increase of $2.988 billion, or 6.19%.
Spending $3 billion more than the NDP did isn’t really getting spending under control.
But what if we look at inflation? Given that inflation has been astronomical the last couple of years, has the UCP’s spending kept up?
Well, it’s tough to predict what inflation will be by the end of February 2023, but what we do know is that between the first quarter of 2019 and the second quarter of 2022, the consumer price index in Alberta has risen from 143.1 to 161.4. That’s an increase of 12.7%.
Had the UCP kept spending on operating expenses in line with inflation, they would’ve ended up spending an extra $6.13 billion.
And if we apply the same 12.7% to all expenses (not just operating expenses for ministries), they would’ve spent a total of $63.47 billion.
Except they’re forecasting a total spend of $62.73 billion.
In other words, had the kept total spending in line with inflation, they would’ve ended up spending an extra $0.74 billion. Instead of having a surplus of $13.2 billion, we’d have a surplus of $12.46 billion.
Yeah, I think this surplus has more to do with commodity prices than it does with how good the UCP are at balancing the budget.
Since we’re on the topic of ministry operating expenses, let’s take a look at how spending in each ministry changes with this new fiscal update.
|Agriculture & Forestry||$860||$866||$6||0.70%|
|Community & Social Services||$3,923||$3,918||-$5||-0.13%|
|Culture & Status of Women||$150||$150||$0||0.00%|
|Environment & Parks||$507||$513||$6||1.18%|
|Jobs, Economy and Innovation||$380||$380||$0||0.00%|
|Justice & Solicitor General||$1,475||$1,497||$22||1.49%|
|Labour & Immigration||$225||$225||$0||0.00%|
|Seniors & Housing||$701||$690||-$11||-1.57%|
|Treasury Board & Finance||$1,848||$1,848||$0||0.00%|
Other than for the energy portfolio, there isn’t significant improvement for most ministries.
The government plans to increase operational spending with the energy ministry by $578 million, which more than doubles what they had budgeted to this portfolio.
The next largest increase is the ministry of justice, which should get an extra $22 million.
However, 13 of the 19 ministries saw their budgets either reduced or frozen, despite the $13.2 billion surplus. The Seniors & Housing ministry saw the largest cut, at $11 million, which represents more than 1.5% of their budget.
Where the numbers get really interesting is when we compare them to what the NDP spent in their last budget.
|Agriculture & Forestry||$967||$866||-$101||-10.44%|
|Community & Social Services||$3,634||$3,918||$284||7.82%|
|Culture & Status of Women||$236||$150||-$86||-36.44%|
|Environment & Parks||$574||$513||-$61||-10.63%|
|Jobs, Economy and Innovation||$333||$380||$47||14.11%|
|Justice & Solicitor General||$1,452||$1,497||$45||3.10%|
|Labour & Immigration||$208||$225||$17||8.17%|
|Seniors & Housing||$630||$690||$60||9.52%|
|Treasury Board & Finance||$2,205||$1,848||-$357||-16.19%|
Remember, inflation between March 2019 and June 2022 was 12.7%. If we assume inflation stays at that level until March 2023, then only 3 ministries will be spending enough to account for inflation over the last 3 years or so.
Energy, of course, is spending over 104% more than they did under the NDP. Children’s Services is spending over 50% more. And Jobs, Economy, and Innovation is spending 14.11%.
All the other 16 ministries haven’t spent enough to keep up with inflation. In fact, half of those are even spending less than they did under the NDP.
The largest drop was under the Culture & Status of Women ministry, which is spending over 36% less than they did in 2018–2019. Indigenous Relations saw the second largest cut to operating expenses, at 20.66%. Infrastructure came in third at 16.39% less.
The health ministry, which spends the most of all the ministries, increased their spending over the last 4 budgets by 7.88%, significantly lower than inflation.
The next largest ministry, Education, increased its operating budget by just 2.65%, an even smaller fraction.
And the advanced education ministry, which spends the third most, increased their budget by less than a percent.
Even if we add up all the ministries, including the well-endowed energy ministry, we see a total increase in spending of 6.19% over the last 3 years. Inflation increased at twice as much.
And that’s just inflation. That’s not even considering that the population of Alberta during the same period increase 3.92%.
In other words, when adjusting for inflation, we’re spending less than we were under the NDP (including on hospitals and schools) and trying to service even more people.