Last spring, the Alberta government released their 2020–2021 budget. Last week, they released the 2020–2021 year-end report. And, well, things didn’t quite line up as they hoped it would.
To start us off, here’s what they budgeted.
| 2020–21 budget | |
|---|---|
| Revenue | $49,996 |
| Expenses | $57,306 |
| Surplus/deficit | -$7,310 |
| Capital plan | $6,960 |
So, originally, the government determined that revenues would come in just shy of $50 billion and non-capital expenses would come in at over $57 billion. They anticipated that this would lead to a deficit of $7.3 billion.
They also planned to spend nearly $7 billion on capital projects.
So, how did things actually end up? Well, see for yourself.
| 2020–21 budget | 2020–21 actual | Difference | |
|---|---|---|---|
| Revenue | $49,996 | $43,137 | -$6,859 |
| Expenses | $57,306 | $60,099 | $2,793 |
| Surplus/deficit | -$7,310 | -$16,962 | -$9,652 |
| Capital plan | $6,960 | $6,896 | -$64 |
To make a long story short, we ended up with nearly $7 billion less in revenue and almost $2.8 billion more in expenses, bringing our deficit to just about $9.7 billion more than we anticipated.
Our non-capital deficit was more than double what they had anticipated. In fact, this was the largest deficit since at least 2008–09, and it was $6 billion more than the NDP posted during the 2016 recession. Plus, that’s on top of the $12.2 billion deficit the UCP ran during their first year in office, which was also larger than any single deficit the NDP reported.
Now, I know what you’re thinking: “We were in the middle of a pandemic! We had a oil price crisis! We had a recession!”
And those are all true. But do you want to know why all those things doubled our forecasted deficit? Do you know why we had planned for a $7.3 billion deficit in the first place?
Because we keep trying to balance the budget while either cutting taxes or keeping taxes low, all while more people keep moving into the province and the cost of providing services keeps increasing.
And that’s not just a UCP problem. That’s been happening year after year, for years. For decades even. Regardless of the party in charge.
Had we been lucky to have forward-thinking politicians governing this province all that time, services could’ve been kept up and improved and money could’ve been put aside for emergencies.
Like a pandemic.
Let’s dive a little deeper into the numbers, shall we?
Revenue
First, let’s explore revenues.
| 2020–21 budget | 2020–21 actual | Change | |
|---|---|---|---|
| Personal income tax | $12,566 | $11,257 | -$1,309 |
| Corporate income tax | $4,539 | $3,037 | -$1,502 |
| Other taxes | $5,782 | $5,285 | -$497 |
| Fossil fuel revenue | $5,090 | $3,091 | -$1,999 |
| Federal transfers | $9,110 | $10,532 | $1,422 |
| Investment income | $2,630 | $2,643 | $13 |
| Government business enterprises | $2,358 | -$83 | -$2,441 |
| Premiums, fees & licences | $4,194 | $4,021 | -$173 |
| Other revenue | $3,726 | $3,355 | -$371 |
Every revenue source but two ended up much lower than anticipated.
Transfer payments from the federal Liberal government ended up being $1.4 billion higher—or 15.6% more—than expected. The second revenue source that grew was investment income, but that was up by $13 million, only half a percentage point.
The revenue source that saw the largest drop in absolute dollars was from government businesses enterprises, nearly $2.5 billion less than anticipated. Examples of such enterprises include the Alberta Petroleum Marketing Commission, the Balancing Pool, ATB Financial, and the Alberta Gaming, Liquor, and Cannabis Commission.
The next largest drop was fossil fuel revenue, down by barely under $2 billion. Personal and corporate income tax were both more than $1 billion lower than predicted.
Other sources came to under $1 billion collectively.
As far as a percentage decreases, government business enterprise revenue was down by 103.5%, easily the largest drop. In fact, the next largest drop was 39.3%—fossil fuel revenue. Corporate tax revenue decreased by more than 30%, as well. All the other decreases were under 15%.
Now, here’s revenue compared to what the government actually took in during 2019–2020:
| 2020–21 actual | 2019–20 actual | Change | |
|---|---|---|---|
| Personal income tax | $11,257 | $11,244 | $13 |
| Corporate income tax | $3,037 | $4,107 | -$1,070 |
| Other taxes | $5,285 | $5,747 | -$462 |
| Fossil fuel revenue | $3,091 | $5,937 | -$2,846 |
| Federal transfers | $10,532 | $9,072 | $1,460 |
| Investment income | $2,643 | $2,828 | -$185 |
| Government business enterprises | -$83 | -$225 | $142 |
| Premiums, fees & licences | $4,021 | $3,929 | $92 |
| Other revenue | $3,355 | $3,585 | -$230 |
This time, instead of total revenue being nearly $7 billion less than what they had budgeted, it was a little over $3 billion less than what they received the previous year. Even though personal income tax, federal transfers, government business enterprises, and various fees were higher this year, it wasn’t enough to make up for the losses felt in the other areas.
For example, even though fossil fuel revenues were $2 billion less this past year than budgeted, they were almost $3 billion less than what came in the year before that. Investment income was the only other revenue source that was lower than 2019–20 levels, compared to the 2020–21 budgeted amounts.
Expenses
Next, let’s look at expenses.
| 2020–21 budget | 2020–21 actual | Change | |
|---|---|---|---|
| Operating expense | $47,839 | $46,648 | -$1,191 |
| COVID-19/Recovery Plan | $500 | $4,059 | $3,559 |
| Capital grants | $2,273 | $2,401 | $128 |
| Disaster assistance | $750 | $721 | -$29 |
| Capital amortization* | $3,857 | $4,061 | $204 |
| Debt servicing costs (general) | $1,158 | $1,405 | $247 |
| Debt servicing costs (Capital Plan) | $1,347 | $1,081 | -$266 |
| Pension provisions/(recovery) | -$415 | -$282 | $133 |
*also includes inventory consumption and asset disposal losses
The largest drop in spending, by far, was operating expenses, which isn’t that surprising, considering how large of a portion of a budget it is. However, it was only a 2.5% cut in spending. Other reductions were much higher, such as capital debt servicing costs, which were slashed by roughly 20%.
I found it interesting that the month before implementing COVID-19 restrictions, and 3 months after cases first emerged in China, the UCP dedicated $500 million to dealing with COVID-19, yet they ended up having to spend 8 times that. And that’s not including how much they’ve paid out since March, in the current budget year.
That was easily their largest increase of any one spending area. It was significantly more than all the rest combined.
Here’s what expenses looked like compared to 2019–2020 actuals.
| 2020–21 actual | 2019–20 actual | Change | |
|---|---|---|---|
| Operating expense | $46,648 | $49,501 | -$2,853 |
| COVID-19/Recovery Plan | $4,059 | $218 | $3,841 |
| Capital grants | $2,401 | $1,678 | $723 |
| Disaster assistance | $721 | $1,356 | -$635 |
| Capital amortization* | $4,061 | $3,720 | $341 |
| Debt servicing costs (general) | $1,405 | $1,264 | $141 |
| Debt servicing costs (Capital Plan) | $1,081 | $971 | $110 |
| Pension provisions/(recovery) | -$282 | -$334 | $52 |
*also includes inventory consumption and asset disposal losses
So, not only did the UCP government cut operating expenses by $1.2 billion more than they had budgeted, they cut them by nearly $3 billion more than they had spent the previous year.
That’s a lot of jobs.
Capital grants were up by $723 million over the previous budget year, which is a good thing. When the government spends money, it trickles into the economy, in the form of workers being paid to build stuff and companies buying materials to build stuff.
Government spending leads to job creation.
On the plus side, the provincial government had to spend $635 million less on disaster assistance this past year, compared to the previous. Not sure that luck will continue this year, however, given how hot and dry it is. This seems like perfect forest fire weather.
Debt servicing costs were up by about $250 million, but that’s probably because they had to borrow a crap tonne of money to pay for the pandemic. Oh, and refineries.
Capital spending
Oh, speaking of capital spending.
| 2020–21 budget | 2020–21 actual | Change | |
|---|---|---|---|
| Capital grants | $2,273 | $2,401 | $128 |
| Capital investment | $4,687 | $4,495 | -$192 |
The capital budget has only 2 items: grants and investment. The government spent $128 million more than they planned to on grants, but they spent nearly $200 million less on capital investment. Which means capital spending as a whole was down by $64 million.
What about compared to what they spent in 2019–2020?
| 2020–21 actual | 2019–20 actual | Change | |
|---|---|---|---|
| Capital grants | $2,273 | $1,678 | $723 |
| Capital investment | $4,687 | $3,868 | $627 |
In both cases, capital spending ended up being significantly more than what they spent the previous year. And as I said, spending during a recession is a good thing, as it makes sure money circulates in the economy.
Frankly, government spending anytime is a good thing, for the exact same reason. Government spending means more people have money.
Spending by ministry
Now, $2.8 billion in extra spending for operating expenses is kind of vague, so I figured I’d break it down by ministry, listed in order from the largest cuts to the largest increases.
| 2020–21 budget | 2020-21 actual | Change | |
|---|---|---|---|
| Education | $8,323 | $7,707 | -$616 |
| Health | $20,616 | $20,285 | -$331 |
| Community & Social Services | $3,910 | $3,691 | -$219 |
| Children’s | $1,636 | $1,443 | -$193 |
| Indigenous Relations | $203 | $102 | -$101 |
| Energy | $506 | $413 | -$93 |
| Environment & Parks | $532 | $479 | -$53 |
| Municipal Affairs | $241 | $191 | -$50 |
| Jobs, Economy & Innovation | $298 | $257 | -$41 |
| Culture, Multiculturalism & Status of Women | $185 | $151 | -$34 |
| Infrastructure | $476 | $446 | -$30 |
| Labour & Immigration | $209 | $183 | -$26 |
| Seniors & Housing | $637 | $611 | -$26 |
| Agriculture & Forestry | $833 | $812 | -$21 |
| Justice | $1,443 | $1,434 | -$9 |
| Service Alberta | $487 | $486 | -$1 |
| Advanced Education | $5,126 | $5,132 | $6 |
| Transportation | $403 | $424 | $21 |
| Finance | $1,693 | $1,837 | $144 |
The largest cuts to actual spending relative to budgeted spending were to the education ministry and the health ministry, which combined lost nearly $1 billion in projected funding.
It’s not surprising that these two ministries saw the largest cuts in absolute dollars, given that they are the two largest ministries. It is kind of surprising that the cut to the education ministry was nearly double that of the health ministry, however, since health spends more than twice as much as education does.
If you look at relative dollars, though, they drop down the list: 7.4% and 1.6% of their projected budgets, respectively.
At the top of the list for cuts based on relative dollars is actually the Indigenous relations ministry. They lost over $100 million, which itself is pretty significant, but that drop was 49.8% of their projected budget. Their spending was basically cut in half.
The next largest cut was less than half that: municipal affairs, which lost 20.8% of their budget, followed by energy and culture, multiculturalism, and the status of women, both of which lost 18.4% of their budgets.
Only advanced education, transportation, and finance saw increases in spending: $6 million, $21 million, and $144 million, respectively, which works out to 0.1%, 5.2%, and 8.5%.
Now, let’s compare 2020–21 actuals to 2019–20 actuals:
| 2020-21 actual | 2019-20 actual | Change | |
|---|---|---|---|
| Health | $20,285 | $20,870 | -$585 |
| Education | $7,707 | $8,134 | -$427 |
| Advanced Education | $5,132 | $5,477 | -$345 |
| Community & Social Services | $3,691 | $3,965 | -$274 |
| Energy | $413 | $597 | -$184 |
| Children’s | $1,443 | $1,548 | -$105 |
| Environment & Parks | $479 | $558 | -$79 |
| Finance | $1,837 | $1,900 | -$63 |
| Indigenous Relations | $102 | $162 | -$60 |
| Agriculture & Forestry | $812 | $868 | -$56 |
| Culture, Multiculturalism & Status of Women | $151 | $205 | -$54 |
| Municipal Affairs | $191 | $244 | -$53 |
| Jobs, Economy & Innovation | $257 | $282 | -$25 |
| Seniors & Housing | $611 | $634 | -$23 |
| Transportation | $424 | $439 | -$15 |
| Infrastructure | $446 | $459 | -$13 |
| Labour & Immigration | $183 | $196 | -$13 |
| Service Alberta | $486 | $496 | -$10 |
| Justice | $1,434 | $1,442 | -$8 |
Looks like health and education switched spots. The health ministry spent $585 less last year than they did last year, and the education ministry spent $427 million less.
Advanced education wasn’t far behind, in third place, at $345 million. Which I find interesting. They spent $6 million more on universities and colleges than they had budgeted last year, but it still was nearly $350 million less than what they spent the previous year.
Community and social services also had a larger cut in spending, with $219 million less than budgeted but $274 million less than what they spent in 2019–20.
In fact, there wasn’t a single ministry who spent more this past year than they did the previous year.
In relative dollars, Indigenous relations was on top again, spending 37% less than they did in 2019–2020. Energy was next at 30.8%, and culture, multiculturalism, and the status of women was third at 26.3%. Municipal affairs was the only other ministry spending more than 20% less in 2020–21 than they did in 2019–20: 21.7%.
“But, wait,” you might exclaim. “Didn’t the UCP government spend, like, a billion dollars on health because of COVID-19?”
And you’d be right.
Alberta spent $1.093 billion on health operating expenses related to COVID-19. Keep in mind, however, that they had budgeted half that: $500 million.
They spent $593 million more on COVID-19 related health operating expenses than they had planned. On the other hand, they spent $585 million less on non-COVID-19 related operating expenses than they did in 2019–2020.
In other words, the health ministry effectively spent on COVID-19 operating expenses last year as much as they cut from the previous year—give or take $8 million.
Debt
Finally, debt.
According to the year-end report, the Alberta government spent nearly $20 billion on direct borrowing: $5.475 billion on capital and $13.349 billion for fiscal plan. That’s about $9.5 billion more than they had planned.
The new debt they incurred pushed the total debt owed by the government past the $100 billion mark. The report claimed that the provincial debt sat at $108.3 billion as of 31 March 2021.
They also hold roughly another $30 billion in other liabilities, including $8.6 billion for pensions, $3.1 billion for public-private partnerships, and 800 million for coal phaseout. All other liabilities total about $16.7 billion.
The government has $135.2 billion in assets though—$78.1 billion in financial assets and $57.1 billion in capital and non-financial assets. So, if we sold it all, we could pay off all the debt. I guess that means, on paper, we’re still looking like we’re in financial shape.
In case you’re wondering, the Heritage Fund currently sits at $16.4 billion.
