On Feb 27, 2020 the Kenney government released Budget 2020. The day it was tabled it was under water, less than two weeks later it drowned.
It sank beneath the surface once and for all because of a snake (or some other creature) in a wild animal market in Wuhan, China that unleashed the coronavirus which could trigger “the most severe oil market shock in history by throttling demand from heavy industry and airlines.”
To be fair, COVID-19 was unforeseeable, however Budget 2020 is fatally flawed because it continues to promote Alberta’s one-trick pony economy and the nonexistent Alberta Advantage which will result in Albertans being worse off than they ever were.
Same old, same old
Budget 2020 is a déjà vu budget; a cut and paste of Budget 2019 right down to its key economic assumptions.*
It forecast oil prices of $58 rising to $63 in 2022. The day the budget was released oil prices were around $45; less than two weeks later they were in free fall thanks to OPEC+ failing to agree on production cuts at their meeting in Vienna this weekend.
Exacerbating Budget 2020’s lack of credibility was the UCP government’s reliance on revenue sources, like federal transfers and more investments, that are completely outside its control.
As is par for the course, there was no hint of implementing a provincial sales tax to provide a sustainable and predictable revenue source. If Alberta had a tax system like the other provinces, we’d have a $7.6 billion budget surplus this year. But no, if the budget won’t balance Mr Kenney won’t raise taxes, he’ll simply cut deeper.
Cuts
Mr Kenney has repeatedly said Budget 2020 represents a minor cut, around 3%, and we should consider ourselves lucky he didn’t adopt Ralph Klein’s slash and burn approach to slaying the deficit.
This is a misstatement because:
- It fails to account for population growth and inflation which put the cuts in the 15% range.
- The 3% cuts aren’t evenly spread across all ministries. For example, services to seniors will be cut by close to 20%, healthcare cuts are closer to 30% and post secondary cuts are a whopping 50%.
All Albertans are feeling the impact of these cuts and they’re hounding their MLAs and taking to the streets to voice their dissatisfaction.
Waste
The government promises to reduce waste. That’s good right, everyone hates waste, but we can’t agree on what “waste” is.
Budget 2020 is no help. It promises to engage in activities that are “nimble”, “attentive”, and not “inefficient” without explaining how these will reduce waste.
Instead of mucking around on the edges, let’s focus on some big ticket items, like the $30 million/year War Room, and ask the energy sector’s CEOs whether the War Room has added value over and above that generated by their own public relations, investor relations and government relations departments. Heck, let’s ask the industry associations and chambers of commerce as well. If the answer is no, then we can scrap the War Room and save $120 million over the UCP’s four-year term.
Fat cat public servants
Public sector compensation is a hot button issue for those employed in the private sector who made good money when the economy was booming and are now unemployed or underemployed. They say the public sector should share their pain.
Leaving aside the obvious point that “share my pain” is not a persuasive argument, there appears to be an underlying assumption that the public sector is grossly over paid.
This is incorrect.
Economist, Richard Mueller, researched the public sector wage premium (the percentage difference between the earnings of public sector workers and private sector workers) from Jan 2006 to Dec 2017. He found the average wage premium in Alberta is 3.7%, which is below the national average of 5.7% and concluded there’s not much scope to balancing the budget by taking an axe to public sector wages.
Of course, we could fire the lot of them, bringing public services to a grinding halt and increasing Alberta’s unemployment rate which currently sits around 7%, but that would be cutting off your nose to spite your face.
Unemployment
Alberta lost over 100,000 jobs in the peak of the recession and needs 85,000 jobs to get back to pre-recession levels. Of major concern is the fact that half of Alberta’s unemployed are young men with high school or less in education, consequently their skills don’t match what employers require. Roughly half of these young men have signed up for retraining, the remainder have pulled out of the work force.
This is a serious problem. One would expect Budget 2020 to focus heavily on skills development, however its policies are inconsistent and contradictory. On the one hand Budget 2020 provides funding to upgrade trade skills, on the other hand, it cuts funding to post-secondary institutions, including trade schools, while at the same time fast-tracking newcomers to fill jobs the highly skilled tech sector.
This paradoxical approach does not bode well for Albertans hoping to enter or return to the workforce.
At the end of the day
There are many ways a budget can be derailed (cue the snake in the wild animal market), but there’s no excuse for adding to the misery by turning our backs on the vulnerable and refusing to prepare Albertans, be they children or adults, for the future.
*Much of this discussion is based on the U of C School of Public Policy panel discussion, Mar 3, 2020. Panelists: Trevor Tombe (economist), Lisa Young (political scientist), and Janet Brown (pollster). Moderator: Rob Breakenridge (770 CHQR)
Susan on the Soapbox 
Egads, $5 a barrel for Alberta oil was the prediction on the national news tonight. Saudi Arabia has dropped the hammer.
CallmeHal2000 Jason Kenney and the UCP are simply running out of any excuses as to who they can blame for the problems that they created, due to their lack of planning.
“I’ve been super-clear with Albertans about that. This is our plan. We’re sticking to it. If the world throws a wrench at it we’re going to have to adjust.”
That is what Jason Kenney told Rick Bell of the Calgary Sun last week. The world has thrown a wrench at it. We’re going to have to adjust.
It is a nightmare.
Hal, it’s the reverse of the oil crisis of the 1970s. One of the upsides to the 1970s crisis was the US started pushing to become more energy self sufficient. Hopefully one upside of this crisis is Alberta will finally understand the importance of diversifying our economy.
Susan: Thanks for another great blog. I have a hunch that we are in for a very nasty recession. Also, I don’t think oil prices are on the rise, but will go lower. Triple digit oil prices are no more. What was foolish was for Jason Kenney to think that oil prices will rebound, after it has been established that oil prices went in the gutter 6 years ago. This, in combination with the UCP’s nearly $5 billion in corporate tax cuts, that hired no one, and the UCP’s other foolish spending, on things like the War Room, and other things, means Jason Kenney had to impose Ralph Klein type austerity measures. We can still feel the affects of what Ralph Klein did today. The UCP’s senseless austerity will compound problems, and not save money. If the Alberta PCs, starting with Don Getty, did not waste money on the most costliest debacles, and did not alter the right oil royalty rates that Peter Lougheed gave us, we would not be in this mess today. Peter Lougheed did have experience in the oil industry, in the 1950s, I think, and knew how volatile oil is as a commodity. That’s why he planned ahead. The Alberta PCs put in a myriad of different taxes. Where did all this money go to? I also recall in 2007, the Alberta government of the day, which was the Alberta PCs, were starting to look at the concept of a P.S.T for Alberta. Receipts had P.S.T on them. A friend of mine asked me why this was on the receipts. He thought we would get one. I also see costs of things going up further, with things like food, and utilities, (Ralph Klein’s deregulation made utility costs go up exponentially), but the UCP will make it worse. We are in for a rough ride. If we would have stayed with Rachel Notley, I think we would have been better off. We still would not be perfect, but far better off than with the UCP.
Very good points Dwayne. Just to pick up on your point about the Ralph Klein’s cuts. at the School of Public Policy panel, one of the panelists mentioned the Klein cuts and said the thing that’s different here is that Klein picked off the low hanging fruit (eg. privatizing liquor stores and registry offices), this means Kenney will be cutting the really important stuff. Two examples spring to mind: the fight with the doctors and his announcement that he will privatize parks and fully or partially close parks and privatize. Albertans are livid.
Susan: Ralph Klein also laid off a large number of nurses and teachers, and let infrastructure deteriorate.
Yes, you’re right Dwayne, I didn’t mean to imply the Klein cuts didn’t do great damage, they did. This was just a comment from one of the panelists who noted there are no easy cuts left. She also said fobbing people off with legislation that lets them drink in parks isn’t going to cut it. It’s a bloody mess and it’s getting worse every day.
Nothing good comes from being ruled by right wing religious fundamentalists.The church did not train them to run anything more complex than a household. Our opposition and I mean all our political parties need to clearly denounce this type governance. Their ultimate goal is to destroy and privatize public services it is that clear.
Brent, I think you nailed it. Politicians who are constrained by ideology (whatever it may be) are blindsided when their worldview is upended by reality. I suspect Kenney is in a state of fear right now, remember how he said the NDP and Federal Liberal policies were to blame for the downturn in investment in the energy sector? He promised the UCP would introduce new investor-friendly policies and bam! the jobs and the economy would come back with a vengance. Then along comes COVID-19 and the Saudi/Russia price war and the UCP’s investor-friendly policies go up in smoke. Welcome to the real world Jason.
I am one who argues against a sales tax. This is because if one looks at the Alberta gvts spending history, one can see that the more money that our Alberta Government has, the more it spends. The Alberta Government has continued this habit even though revenues are down.
Ed, I fully understand why you feel that way. The last few decades of conservative rule demonstrates that it didn’t matter how much money the government rakes in, it flies right out the window again. It is my hope (naive perhaps) that PST revenues would be used to support public services like health, education and services for the vulnerable. At the end of the day, that’s what government is there for.
Susan: Here are some things I read tonight.
WTI $29.85 -27.69%
Brent Crude $33.20 -26.66%
Natural Gas $1.163 -5.56%
Mars US.2 $41.98 -10.11%
Opec Basket $51.74 -0.48%
Over $21 billion wiped off of cryptocurrency markets in 24 hours after massive oil price plunge.
Russia is at odds with Saudi Arabia, in relation to oil productions. I also read tonight that oil prices will likely go into the $20 price range.
Stocks tumbled.
What do you interpret from these things? I’d like your thoughts on all of this? What do you think Jason Kenney will say about this?
Dwayne, there are experts better placed than I am to interpret these things, but I think Alberta (and Canada to a lesser extent) is in for a very rough ride for at least a year if not longer.
As far as what Kenney will say about these things, he’s said all sorts of contradictory things already. For example when he was campaigning he said it’s government policy not global oil prices that determine Alberta’s economy and blamed Notley and Trudeau for policy decisions that hurt the energy sector; and last Dec/Jan he said 2020 would be a “turnaround year.”
Now he’s backtracking (but trying to look like he’s not backtracking).
He acknowledged that COVID-19 and the Saudi/Russia price war are damaging Alberta’s economy (both have nothing to do with Notley/Trudeau policies) and this is going to be such a bad year “all options” are on the table; then he undercut that promise by stating categorically that one option he refuses to consider is a PST and he’s asking for advice from a panel led by Jack Mintz (of all people).
Kenney is a terrible leader, we’re about to find out how terrible as this wretched year unfolds.
Susan: I think if the R.C.M.P don’t prosecute Jason ‘VPN’ Kenney, he will end up retiring from politics, and collect his nice plump political pension. Federal politics might be out of the cards for Jason Kenney. In relation to your above responses, which also tie in here, when there is nothing more to cut, what else will Jason Kenney be able to do? As under Ralph Klein, with his cuts, (which I recall Don Getty claiming he started), the vulnerable in Alberta, nurses, teachers and infrastructure took a big hit. Ralph Klein was not effected by the cuts he made, which still can be felt today. Jason Kenney is also not effected by the cuts he has made. Both got political perks that cushioned them from any problems the rest of us face. I do recall the Alberta PCs discussing the idea of a P.S.T, around 13 years ago. I’m also aware that there are already a variety of taxes brought in by the Alberta PCs. I’m curious as to where this money went to? I think we will feel the problems for years to come, under the UCP. Many Albertans did not realize just how good they had it under Rachel Notley. She was in the same league of excellence as Peter Lougheed was. If Peter Lougheed were still around, he’d rake Jason Kenney over the coals, for what he is doing.
So, is this what going to hell in a hand-basket feels like?
Alberta can’t wait three more years while the province completely tanks because of Jason (I’ve-Got-An-Expert-Panel-For-That) Kennedy’s unbridled worship of far-right conservative ideology. Time to return the grown-ups (the NDP) to power to save Alberta — the sooner the better for everyone!
“Time to return…(the NDP) to power.”
I dunno, J.E., Kenney is like some sort of Used Car Party ‘replicant’: four year lifespan, he probably thinks he has “time enough”,
GoinFawr: that was an eerie clip, but somehow appropriate in the circumstances.
J.E. Molnar, well said! It’s disturbing that Kenney says he’s going to talk to Trudeau this week about getting a “handup” not a “handout” and yet all he’s asking for is the same old things he’s always whingeing about, namely removing the cap on fiscal stabilization transfers, changes to payroll taxes and help creating jobs in reclaiming orphan wells. That last one for sure feels like a “handout” to me. The orphan wells were created by Alberta’s energy sector and our government let them get away with it, and now we want the Feds to us clean up our mess. When did a corporation’s failure to do what it promised to do while it was making piles of money become the Fed’s problem?
Given that we’re in a whole new world since COVID-19 and the Saudi/Russia price war, you’d think Kenney could come up with some creative requests for federal assistance instead of the same old, same old. Sadly, these guys are dinosaurs, they can’t think about what’s good for Alberta’s future, only what’s good to fix up Alberta’s past.
Jason Kenney and the UCP are in deep doo-doo. Was at supper this weekend with a group of stalwart conservatives (big and small c) and not one word was spoken in support of the current government. All these folks spoke about was the wrong headed approach the government was taking in all spheres. My wife and I were astonished and realized that if you lose right wing seniors you are hooped. They vote! There were even expressions of nostalgia for the “sensible government Notley gave us”. Holy moley!!!
That is a heartening anecdote in these dark times Joe, thanks.
Joseph, I’m not surprised. The energy sector must have given up on him months ago. The War Room has NOT enhanced the industry’s reputation, and the ‘public’ inquiry into anti-Alberta energy groups is a McCarthy-esque farce. The attacks on the public sector (teachers and nurses) escalated when JK went after the doctors, and then JK had the temerity to say he wasn’t worried the doctors would leave because they’d be leaving a higher paid jurisdiction for a lower paid jurisdiction. That was beyond stupid given JK ripped up the doctors’ contract so he could reduce their compensation. So their real choice was to stay in a lower paid jurisdiction where the government can’t be trusted to respect the sanctity of contract, or move to another so-called lower paid jurisdiction like BC or a higher paid jurisdiction like the USA. It’s not rocket science, especially for the young ones.
I suspect the big and small “c” conservatives are starting to see through Kenney, lots of bluster, mediocre ideas and poor execution.
Thanks, Susan, for a great summary of Kenney’s incompetent application of mean-spirited, misguided ideology. I hope your post gets spread far and wide!
Thanks Judy; as you always say, dogma gets you nowhere, and Kenney is a case in point.
And the solution to everything is to change nothing, but appoint an “emergency economic panel”, and go on another trip. He’s on to Ottawa, cap in hand again. Earth to Jason: the Prime Minister is dealing with some rather pressing matters right now. You might not have noticed, but there’s a major public health issue, and the crashing stock markets, and did you know the gonzo price of oil affects the whole country?
Not the time to ask for Alberta’s weekly allowance or threaten a buffalo stampede, but a great time to hide out in a hotel and escape all questions related to managing the coronavirus crisis and the future of this province, which is slip-sliding away. BTW, “emergency panel” seems to be an oxymoron.
The ship is sinking and the captain rowed away in the lifeboat. Enjoy the Diefenbunker, Jason!
CallmeHal2000: seems to me whenever the world slips out of the 1950’s model Kenney carries around in his head Kenney’s a loss. And when he’s at a loss he appoints a panel chaired by someone he trusts to deliver the same old conservative ideology, namely: (1) now’s not the time to raise taxes, so the corporate tax cut is safe and (2) now’s the time to tighten our belts, so here’s another dollop of austerity, and (3) we’ll bully the Feds into giving us a pile of money to clean up our abandoned wells. Nothing creative, just the same old failed ideology.
Rachel Notley asked for an immediate rewrite of the Budget which was underwater well before the coronavirus hit; Kenney refused, saying the budget must pass to give the government spending authority by Mar 31. This is a red herring, the government always runs short of money before the budget passes, they have a process to approve interim expenditures that tide the government over until the next budget passes.
I think he’s stalling and praying for a miracle.
As the saying goes, the definition of insanity is repeating the same thing and expecting a different result. So in 2019 we went from a provincial government that was trying to move our economy away from dependence on oil to one that has doubled down on it. It is like they put all their chips on blue and are hoping for a big win, except with the way oil prices are going now, it looks like it will be even more disastrous. No, we could not have predicted the corona virus, but there were plenty warnings previously about the path this government chose, that it ignored at its and our peril. It is so really bad that the numbers in the budget which were barely credible at the time it was delivered, now seem completely unrealistic and less than two weeks have passed.
We have a government doing other very stupid things, as you pointed out – cuts to post secondary education, when there is a huge need for job retraining. I think the UCP is flailing, like a drowning person and the economic situation has overwhelmed them. They were hoping for a Klein like recovery in oil prices to save the day and instead got a Getty like collapse in oil prices. For those not around or who have forgotten about the Getty years, let me give a quick summary. After some years of languishing oil prices, his popularity plummeted and he was prevailed on to retire by his own party, who realized they could probably not win re-election with him. Mr. Kenney this could be your future too.
Dave, thank you for reminding us of what happened to Don Getty the last time around. Kenney blew on to Alberta’s political scene with so much bluster that we tend to forget his own party might toss him out. Now he’s hinting at increasing debt to cover the cost of putting people to work building infrastructure. (This is what David Dodge told Notley to do and Kenney et al were horrified). Some stalwart conservatives will see this as a betrayal. Add to that the people who say he’s let them down on Wexit, plus those who believed his campaign promise of “jobs, jobs, jobs” and still don’t have “jobs, jobs, jobs” and before you know it, people with torches and pitchforks are storming the gate.
I cannot wait for those people with the torches and pitchforks. It is so obvious we are on the wrong path that hurts. It feels like looking at a teenager sinking into a drug life and nothing changes the situation. Life experience, common sense, humility and democratic values along with strong critical thinking is what moves us forward together. Bullying has never resolved anything and lack of vision is the final nail in the coffin. That is what it feels like to live in Alberta these days – waterboarding. Condescending attitudes are so prevalent it embarrasses me. This kind of environment and total lack of respect and lack of exchange of ideas is having tremendous negative effects on me. It feels as if we have everything to succeed and we choose not to.
Carlos, I agree with you 100%. Kenney’s been saying some weird things about the impact of these events on the industry. He says Albertans and the industry are “battle-hardened” and companies are leaner and better able to cope with the downturn. CAPP doesn’t agree, and the IEA says the situation we’re witnessing today “seems to have no equal in oil market history.” Kenney can blather on all he wants about being “battle-hardened” and “lean”, but words can’t fix a situation where we’ve got too much supply and significant demand reduction and we’ve put ourselves in the position where this is the only game in town.
As you point out, we have everything to succeed, but we choose not to do so. Silly of us.
There is only ONE way through this mess now. I don’t know that the mentally-challenged troll playing the Premier and his cabinet of slobbering idiots have the capacity to understand this but the PM does. As do other leaders around the globe who have been hit hard with the reality of this pandemic.
That way is through spending. Spending! Lots of spending! Billions of dollars of spending!
First, the very first is spending lots of time & money on information collection and dissemination. This is completely contrary to Kenney’s policy. Without this first step, there is not a snowballs chance of anything but infection and death.
Second, bread and circuses. But mostly bread. Hungry people are not interested in entertainment.
This means jobs; lots and lots of jobs.
In Alberta, two areas need massive financial support; reclamation and infrastructure.The need for oilfield reclamation is such that every single petro-worker, whether young or old, whether still in school or years of experience, can go to work on this oilfield reclamation project today and stay with it until they retire. The need is massive, unimaginably so.
How it gets paid for is another story. But the Kenney gov’t can start with 10,000 workers and a few billion dollars.
The infrastructure in this province has never been rationalized. Klien handed out construction contracts on the basis of buying votes so of course, there never was any needs assessment nor any quality control follow-up. Since the end of the last spike in oil prices, maintenance costs are easily and always cut from budgets under pressure.
Project management has never been a respectable profession in this province; project funds and completion requirements are always political considerations. Often the politician doing the considering has no training and never in their life had a budget greater than 6 figures.
All in, the infrastructure in this province is in dismal shape, as evidenced by the hiways all across the province. Not just roadways either, flood and waterways infrastructure, provincial facilities (hospital, school & staff buildings), utility delivery and discharge and of course, recreation facilities. Now is the time to stop dismantling these provincial resources and to start to maintain them and build them up.
How this gets paid for is as obvious as it’s proven; borrow the cash to build up your assets. A few billion dollars today will not only have the immediate benefits required for this crisis but long term benefits for the Albertans of the future.
This is it. The money will get spent. Only question is, on what?
Can Kenney pull his head out and do what a responsible leader must do? I really doubt it!
‘Can Kenney pull his head out and do what a responsible leader must do? I really doubt it!’
I also doubt it because in order for one to put his/her head out, one definitely needs to have one.
Good point, Carlos, one needs to be able to think before one can act rationally. One also needs a heart before one can act with empathy. Traits that many of our leaders are sorely lacking.
He keeps saying that we are proud and we do not need charity but every other week he is out begging from the Federal Government. He is back in Ottawa instead of changing his disastrous budget and get people back to work. It would also be helpful to talk to people instead of bullying them to austerity. We are all human beings that need to be respected in order to build hope and positive energy in the communities we live in, not this constant threat of unemployment and the propaganda that we all have 20% more that all other Canadian provinces. Summarizing – we are all spoiled except for his UCP team who like political Ranger very well describes sound more like slobbering idiots. Conservatives have been running this province for 45 years and continue to blame half the planet for the results which are clearly a disgrace. Many people talked about this in the last 40 years and they called them commies. So now it is time to let this last evolution of extreme conservative run its course so that people that support them can shut up for good, because I am sure that there will be nothing left.
I know I have used harsh language before but I honestly wonder if they deserve anything better. Friends, these people are destroying our province, as simple as that.
Carlos, you make valid points. The problem here is these hard core conservatives know in their bones that change is coming and they’re terrified, so they’ll cling to their old ideas because they can’t contemplate anything else. Kenney uses their fear to consolidate his grip on power.
You know what gives me hope, the knowledge that if things become intolerable here, there are many great places in our country I can move to.
Political Ranger: you’ve put this in the clearest possible terms, I only hope someone in government will heed your advice.
What’s deeply concerning is not all UCP MLAs are happy with Kenney’s austerity policies–they’re particularly upset about cuts to healthcare and the impact this will have on rural medicine–they’ve voiced their concerns anonymously but are afraid to openly share their concerns with Kenney. What does that tell you about Kenney’s leadership (my way or the highway) and the UCP MLAs’ commitment to their constituents (I’ll stand up for you only when it doesn’t hurt my standing with Kenney). Pathetic.
And for those who say all political parties are like this, go back to Hansard and read what some of the rural NDP MLAs had to say about how the electoral boundaries were redrawn. They weren’t afraid to tell Rachel Notley they didn’t like the final result.
“Kenney’s leadership (my way or the highway)”
Given that Jason Kenney learned his leadership style from Stephen Harper, it shouldn’t be surprising that he has the leadership style he does.
If I were a UCP MLA, what would have really stuck in my craw was the passage of the bill that led to the firing of the election commissioner, Lorne Gibson. (Bill 22?) Kenney flew to Texas and instructed his MLAs that all 3 readings of the bill were to be passed by the time he got back. Prior to the passage of the bill, the ethics commissioner offered the opinion that UCP MLAs being investigated by Mr. Gibson could be in a conflict of interest if they were to vote on the bill. Thus Mr. Kenney’s leadership ‘style’ is to tell his MLAs to put themselves in a conflict of interest situation while absolving himself of the same situation.
Leaders around the world suddenly realize – if they have a brain of course, many do not – that they are not as powerful as they think. An extremely small being without a brain is changing history.and showing them what is like to be just like everyone else and that after all we are all part of an ecosystem we are rapidly annihilating.
Amazing how focus has changed in a couple of days.
Carlos, it’s absolutely remarkable isn’t it, when supersized egos deflate like a punctured balloon. Today Trump declared the coronavirus a national emergency, just a few days ago he was blowing it off as another variant of the flu. Apparently he’s concerned some journalists will deliberately infect themselves and then sneeze on him on Air Force One. The man is deluded.