A Recovery & Self-Defense Budget?

The Kenney government presented its budget as part of a larger effort to recover Alberta’s fortune from the damage done by the Notley government and to defend the province against continued strangulation at the hand of Trudeau’s federal government. Whatever one thinks about Notley and Trudeau, the Kenney-story is patently false. Stirring up resentment might pay at the ballot-box, but the policies pursued behind the smoke and mirrors it creates can do harm to the people these policies allegedly serve.

It wasn’t Rachel Notley

The Kenney-story starts with the claim that the Notley-government created piles of debt that weighs heavy on entrepreneurs’ propensity to invest. Fact is that government revenue, like in any other oil producing country or region, took a hit when oil prices plummeted from 105 USD per barrel West Texas Immediate in July 2014 to 45 USD in January 2015. The oil price had bottomed out before Notley was elected in May. Nothing she did in office caused the oil price collapse. Oil prices are hovering around an average of close to 60 USD ever since, no matter who is in office in Edmonton, Ottawa or elsewhere.

In 2014, when the oil price peaked, the government ran a 0.3 percent surplus compared to GDP. Revenue shortfalls turned this into a 1.9 percent deficit the next year. Contrary to the Kenney-story, this wasn’t the opening act of an unprecedented accumulation of debt. By the end of Notley’s term in office, Alberta’s debt-to-GDP-ratio stood at 7 percent, followed by British Columbia with 15 percent. At top of the list: Newfoundland with 47 percent.

It wasn’t Justin Trudeau either

High debt-levels in Newfoundland and other eastern provinces lead to the second part of the Kenney-story: Albertans struggle harder than anybody else because they have to pay Eastern Canada’s bills and are denied access to the world market.

There surely are Albertans who struggle, either because they can’t find work, don’t have access to unemployment benefits or because wages are too low to pay the bills. However, these are not the problems the Kenney-government has on its agenda. Their concern is not the plight of many at the bottom of the social ladder, let alone the stark contrast between them and the few rich at the top. Their concern is the exploitation and suppression of Albertans by Eastern Canadians.

If one isn’t interested in the distribution of income and wealth between the rich and the poor in any jurisdiction – one looks at averages. In 2017, the average income in Alberta was 78,214 CAD. The highest of all provinces, only the Northwest Territories, registered even higher incomes: 108,065. At the bottom of the list: Prince Edward Island with 44,180 CAD. Even after taxes, which include monies going into fiscal transfer payments, average incomes in Alberta are substantially higher than in any other Canadian province. The reason that a lot of people struggle in Alberta is not because they are exploited by people in the East, it is because of inequalities within the province.

But they won’t let us sell our oil

One of the reasons that average income in Alberta are the highest amongst the Canadian provinces despite the collapse of oil prices in 2014/5 is that many of the workers who lost their jobs over this went back to their home provinces in the East. Another reason is that the oil industry in Alberta, though only creating around six percent of jobs in the province, is generating solid profits for its shareholders, including those residing in Alberta. In 2015, in the midst of collapsing oil prices, the five largest oil companies operating in Alberta paid record dividends of 5,079 million CAD. This figure dropped to 3,320 the following year, but was already back to 4,159 in 2017, above the 3,941 paid out in 2013, the last year of booming oil prices.

Apparently, these profits are still not high enough to trigger investment, employment and prosperity for all. At least not in the Kenney-story that charges Trudeau with not building the Transmountain Pipeline and thereby impeding Alberta’s oil exports. Even if one disregards environmental concerns, as Kenney and his cabinet members proudly do, the argument is wrong. A little-known fact, but a fact nevertheless, is that the existing Transmountain Pipeline operates well below capacity. Which might be one of the reasons that Kinder Morgan was happy to sell it to the Trudeau government. Before the deal, Kinder Morgan stock languished at 15 USD per share. After the deal was signed, it swiftly rose to 18 USD and now sits around 20 USD. Meanwhile, the federal government sits on the bill for a project for which, as the existing pipeline operating below capacity indicates, there is no demand.

Beyond smoke and mirrors

Kenney’s budget spin is plain wrong. Notley did not cause a fiscal crisis and Trudeau is not strangling the province. If anything, both tried to appease the oil lobby but didn’t get the electoral rewards that the Kenney government uses to push cuts through parliament before too many people notice that it is these cuts, not Notley and Trudeau, hurt them. These cuts will make work and life more difficult for everybody but the few rich, but particularly those at the bottom of a society already plagued with inequality and insecurity. The former is the result of an underdeveloped welfare state, the latter by the province’s overreliance on the oil industry. These problems can be fixed – by stopping Kenney’s scapegoating, curing widespread tax-phobia and building a diverse economy.

Ingo Schmidt

Assistant Professor, Labour Studies

Message from AUFA President Regarding the Alberta Budget

Dear AUFA members,

As you are all likely aware, last Thursday, the Alberta government released its 2019-2020 budget.

In a nutshell, Athabasca University will take 3.6% hit to base grant and loses infrastructure funding. All in all, about $3.4m loss in 2019/20. The glib explanation offered for how the budget was devised is that cuts are based on the capacity for an institution to absorb cuts.

Given that AU is running an approximately $14m surplus, the relatively modest cut that Athabasca received in the budget is likely a manageable cut. To date there has been no discussion offered regarding tuition increases beyond lifting the tuition cap.

For comparison, The U. of A. and U. of Calgary received 6.9% cuts, while Grant MacEwan received a 7.9% cut, with Athabasca and Lethbridge receiving 3.6% cuts. Mount Royal only received a 1.3% cut. Inexplicably, the four faith based institutions and Concordia University Edmonton did not suffer any cuts whatsoever.

This is not to say that we should not be concerned. Quite the opposite. The projected cuts to the post-secondary budget over the course of four years, factoring the cost of inflation will be much higher by the time the four year cycle is completed.

“The multi-year Business Plan goes on to suggest suggests that by 2022-23 the cut in net operating will be over 38% from last year’s actuals. Now, net operating results in the business plan aren’t quite the same thing as transfers to institutions in the estimates, but they’re close ($2.57B vs $2.27B). It’s hard to tell exactly what that means, but to me it sure raises the possibility that additional cuts of 20%-25% are baked into the plan for the next three years.”

Higher Ed Strategy

The 2019 provincial budget projects 764 fewer jobs at post-secondary institutions and government agencies by March 2020. The budget when read along side the four year business plan is indeed alarming.

I think that we should be concerned not only about the budget for the post-secondary, but also the entire provincial budget which demonstrates a lack of concern—or rather to be blunt—punitive disdain for the public sector. In addition to the cuts to K-12 education, AISH, health care, and seniors, the province transferred the administration of the pension plans for the Alberta Teacher Association, and Alberta Health Services employees to AIMCo -- without any consultation or warning whatsoever to the administrators of those plans. In the case of the ATA, whose plan is worth nearly 18 billion dollars, the plan had been administered by the Alberta Teachers' Retirement Fund Board (not unlike the UAPP, under which AUFA members’ pension are administered) since 1939.

Furthermore, the government has indicated that they will be mandating a 2-5% rollback on wages in the next rounds of public sector bargaining. We simply can not absorb any further freezes or rollbacks to our wages. This has serious implications for pensions for many of our members and day to day budget planning for the rest of us.

The most distressing part of the Post-secondary budget is two-fold. The massive cuts to the infrastructure funding to post-secondary institutions will make meeting the student and research demands extremely difficult. The lifting of the cap on tuition may mean that the cost of tuition will rise beyond the cost of inflation, a scenario that will mean that education in Alberta, unsupported by government investment, will become overly costly and will drive students elsewhere.

Also of concern is the suggestion that universities will be placed on a performance based funding model in 2020-2021. However, it is entirely unclear what this is and how this will be measured and funded. As we know from other jurisdictions, such as Ontario, who has since nearly abandoned this model, these types of metrics based funding are doomed to fail.

My take on the budget is that the provincial government does not see the value in investing in the public sector in general, and in our case, post-secondary education specifically. Nor are they keen to learn about why that would be good for the economy.

As for where that leaves AUFA? I believe that we are in for the fight of our lives—a fight to defend the principles of post-secondary education, our jobs, our research and our role in the social good and well-being of the communities in which post-secondary institutions across the province reside.

This is a fight we can not, and will not lose.

In solidarity,

Jolene