Last week, the provincial government updated their Term Debt Issues document, which lists all the term debt they still have outstanding.
It’s been over 2 months since I last wrote about the Alberta government’s term debt, so I thought I’d write this brief update.
During that time, the UCP government traded 3 more term debts:
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The earliest any of the 3 debts will mature is 2031. The latest is 2052.
The interest rates on these 3 debts range from 1.65% to 2.95%. However, the effective cost of debt (or the interest rate after tax deductions) ranges from 2.257% to 2.877%.
This new $1.95 billion brings the total term debt traded by the provincial government since the UCP were elected to $36.7 billion, spread out over 77 transactions.
The total amount of term debt owned by the Alberta government is a just shy of $100 billion, more than a third of which has been issued since the UCP were elected a little over 2 years. A little less than half of it was issued during the NDP administration.
The remaining 13% or so was issued under the PC government, dating back to 2008.
Keep in mind, however, that it took the NDP 4 years to rack up $49.72 billion in debt. The UCP have accumulated nearly $37 billion in about 2 years. That gives the NDP an average of $12.43 billion a year, and the UCP an average of $16.93 billion a year, an increase of 36.2%.
At this rate, the UCP will have borrowed a total of $67.7 billion during their 4-year term, which will be 36% more than the NDP borrowed during their 4-year term.
By the 2023 election, provincial debt could total as much as $130.7 billion, and the UCP portion would make up 51.8% of it, assuming they keep borrowing at this rate. That’s including subtracting the two debts that mature before then.
Here’s how the debts look like broken down by month during the UCP’s term:
And by budget year.
Obviously, the pandemic had a lot to do with this. Their 4 highest months were during the first 5 months of the pandemic, totalling $17.4 billion.
The next largest month, was 6 months before the pandemic, however: September 2019 saw the UCP issuing $ 3 billion in term debts. Two months later, they issued $2.25 billion, making November 2019 the 7th highest month.
In fact, before the pandemic, the UCP had already borrowed nearly $7 billion in term debts. So, for every $5 in term debt the UCP has issued since taking power, $1 of it was issued before the pandemic.
But the borrowing of $24.3 billion during 2020–2021 wasn’t entirely COVID-19 specific.
According to the 2020-2021 year-end report, the UCP government spent $5.1 billion in COVID-19/Recovery Plan support. Of that $5.1 billion, most of it—$4.1 billion— was for operating expenses:
- $1.1 billion in health
- Continuing care, surgery mitigation, mental health, lab testing, contact tracing, vaccine distribution and other costs
- $626 million for Small and Medium Enterprise Relaunch Grant
- $605 million for municipalities
- Half from Alberta, half from the federal Safe Restart Agreement
- $367 million in critical worker benefits
- $347 million in TIER energy efficiency grants
- $246 million for 50% of small and medium business WCB premiums
- $171 million Safe Return to Class
- $128 million for site rehabilitation
- $0.6 billion in other initiatives
- Skills training, rental assistance, emergency isolation, homeless shelters, food banks, child care, seniors’ lodges, emergency management and pothole repairs.
Then $649 million was spent on capital grants:
- $627 million for municipal stimulus, transportation, water, flood mitigation and TIER-funded energy efficiency projects
- $13 million for Lethbridge Exhibition Centre and Edmonton’s Terwillegar Drive
- $9 million in Education and Infrastructure
And, finally, $402 million was spent on inventory consumption, mostly PPEs.
And if you include capital investment or revenue waivers and deferrals, that jumps to $5.559 billion. That’s still roughly only 20% of the borrowing amount, and that’s assuming it all came from borrowing and not from other sources, such as federal transfers.
So it’s difficult to claim that the higher borrowing was strictly because of the pandemic, given that 80% of the debt didn’t even seem to be necessary to cover COVID-19 and recovery expenses.