Alberta has a revenue problem that was decades in the making

EDMONTON, ALBERTA--(Marketwired - March 15, 2017) - Alberta's budget should focus on revenue reform and on protecting jobs, according to the province's largest workers' rights organization.

When elected in 2015, the NDP government inherited a system for generating revenue for public services and public infrastructure that was badly broken - a system that had become heavily and increasingly dependent on revenue from non-renewable resources. Successive conservative governments used resource revenue to maintain Canadian standards for public services, offsetting the revenue foregone from the province's unique-in-Canada "flat" personal income tax, its lower than Canadian average corporate income tax and its sales-tax-free status.

"The failed revenue policy of successive conservative governments was the height of irresponsibility," Alberta Federation of Labour president Gil McGowan said. "Relying so extensively on non-renewable resource revenue exposed our province's essential public services directly to the volatility of world oil markets."

In an economic downturn, the critical role for public services in the economy becomes even more important. The continued provision of public services serves to stabilize the economy when other sectors are suffering. In the medium term - until the oil and gas industry stabilizes and until the province's longer-term investments in economic diversification begin to take hold - the Alberta economy will continue to depend on governments to underpin economic recovery.

"Public services make a significant contribution to our standard of living and the overall quality of life in the province, especially now while the economy is hurting," McGowan said. "Protecting our public services is vital to supporting individuals and families adversely affected by this economic downturn."

Economic downturns, and resultant budgetary pressures, driven by fluctuations in world oil markets are not new to Alberta. But changing global economic dynamics indicate that oil will remain "lower for longer," indicating that non-renewable resource revenue will likely never return to the highs the province has previously enjoyed.

"The NDP were handed a broken revenue system with tax rates well below those of any other province, and far below those Alberta had a decade ago. Since being elected they have had the courage to make incremental steps towards fair taxation," McGowan said. "But with our current revenue system, our public finances are unsustainable. The only path to sustainability lies through meaningful revenue reform."

Read the AFL's Budget 2017 Policy Brief that was released today.