Alberta
Alberta Budget 2021 Highlights
Maintaining responsible spending
Budget 2021’s responsible approach to spending will mean more investment in priority areas like health care, education and job creation.
Budget 2021 is built on 3 fiscal anchors:
- Keep net debt below 30% of GDP to help protect future generations from rising debt servicing costs.
- Deliver services more cost effectively by bringing spending in line with other comparator provinces.
- Re-establish a plan to balance the budget post-pandemic when a more stable level of predictability returns to the budgeting process.
Getting back on track
Operating expense
- In 2021–22, operating expense is $1 billion higher than 2020–21 forecast and begins to normalize, remaining relatively flat over the next 2 years.
Deficit
- $18.2 billion deficit is targeted for 2021–22, $2 billion less than the 2020–21 forecast.
- $11 billion and $8 billion deficits are targeted for 2022–23 and 2023–24 respectively.
Declining deficit can be attributed to decreasing expense as:
- the costs of the pandemic subside
- the government works to streamline and modernize service delivery
- revenue increases as the economy recovers
Budget 2021 funding highlights
Budget 2021 provides funding of:
- $23 billion for health services
- $8.2 billion operating expense for kindergarten to grade 12 (K to 12) education services
- $6.3 to $6.4 billion operating expense for social services ministries
- $136 million over 3 years for the Alberta Jobs Now program
- $166 million over 3 years for the Innovation Employment Grant
- $500 million in 2021–22 for additional investments in economic recovery
Investing in health care
Alberta’s government is increasing Health’s budget by over $900 million (or 4%) to $23 billion, and that’s excluding the impact of COVID-19.
- $5.4 billion for physician compensation and development (including academic medicine)
- $3.5 billion for community care, continuing care and home care programs, including $20 million over 4 years for palliative and end of life care
- $1.9 billion for drugs and supplemental health benefits.
- $34 million for children’s health supports to expand mental health and rehabilitation services for children and youth
- $140 million over 4 years for mental health and addiction services
Continuing the fight against COVID-19
Budget 2021 invests in continued supports to protect Albertans as we enter the second year of the pandemic.
- $1.25 billion COVID-19 Contingency to address health-care costs for responding to the pandemic, including surgical wait times and backlogs
- This is in addition to $2.1 billion spend in 2020-21
Getting health care back on track
Budget 2021 invests $16 billion for Alberta Health Services operations. Includes:
- Alberta Surgical Initiative
- Continuing Care Capacity Plan
- CT and MRI Access Initiative
Investing in health care capital
Budget 2021 commits $3.4 billion over 3 years for health related capital projects and programs, providing:
- $2.2 billion for health facilities, with $143 million for 5 new projects
- $766 million for Alberta Health Services self-financed capital, for parkades, equipment and other capital requirements
- $343 million for capital maintenance and renewal of existing facilities
- $90 million for health department IT projects
Preparing for recovery
Alberta’s Recovery Plan is a bold strategy to create jobs that get people back to work, build infrastructure and diversify our economy. This includes the acceleration of the Job Creation Tax Cut, which creates employment opportunities by making Alberta one of the most attractive jurisdictions in North America for new business investment. Budget 2021 will spend an additional $3.1 billion in 2021–22 to continue supporting recovery plan strategies.
Budget 2021 invests $1.7 billion more in capital funding in 2021–22 than what was planned in Budget 2020.
The 3-year Capital Plan now totals $20.7 billion and will support more than 50,000 direct and 40,000 indirect jobs through to 2024.
Diversifying the economy
In 2021–24, $1.5 billion invested in Alberta’s Recovery Plan.
Budget 2021 invests in established and emerging sectors that hold the greatest potential for growth and job creation, and are fundamental to our economic recovery including: energy; agriculture and forestry; tourism; finance and fintech; aviation, aerospace and logistics; and technology and innovation.
Economic recovery spending highlights
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- Innovation Employment Grant supports small and medium-sized businesses that invest in research and development
- Developing framework to protect intellectual property in Alberta
- Investment and Growth Strategy supports emerging sectors while building on our existing strengths
- Invest Alberta provides supports and services to drive up investment and showcase Alberta as the best place in the world to do business
Alberta
Alberta government should eliminate corporate welfare to generate benefits for Albertans
From the Fraser Institute
By Spencer Gudewill and Tegan Hill
Last November, Premier Danielle Smith announced that her government will give up to $1.8 billion in subsidies to Dow Chemicals, which plans to expand a petrochemical project northeast of Edmonton. In other words, $1.8 billion in corporate welfare.
And this is just one example of corporate welfare paid for by Albertans.
According to a recent study published by the Fraser Institute, from 2007 to 2021, the latest year of available data, the Alberta government spent $31.0 billion (inflation-adjusted) on subsidies (a.k.a. corporate welfare) to select firms and businesses, purportedly to help Albertans. And this number excludes other forms of government handouts such as loan guarantees, direct investment and regulatory or tax privileges for particular firms and industries. So the total cost of corporate welfare in Alberta is likely much higher.
Why should Albertans care?
First off, there’s little evidence that corporate welfare generates widespread economic growth or jobs. In fact, evidence suggests the contrary—that subsidies result in a net loss to the economy by shifting resources to less productive sectors or locations (what economists call the “substitution effect”) and/or by keeping businesses alive that are otherwise economically unviable (i.e. “zombie companies”). This misallocation of resources leads to a less efficient, less productive and less prosperous Alberta.
And there are other costs to corporate welfare.
For example, between 2007 and 2019 (the latest year of pre-COVID data), every year on average the Alberta government spent 35 cents (out of every dollar of business income tax revenue it collected) on corporate welfare. Given that workers bear the burden of more than half of any business income tax indirectly through lower wages, if the government reduced business income taxes rather than spend money on corporate welfare, workers could benefit.
Moreover, Premier Smith failed in last month’s provincial budget to provide promised personal income tax relief and create a lower tax bracket for incomes below $60,000 to provide $760 in annual savings for Albertans (on average). But in 2019, after adjusting for inflation, the Alberta government spent $2.4 billion on corporate welfare—equivalent to $1,034 per tax filer. Clearly, instead of subsidizing select businesses, the Smith government could have kept its promise to lower personal income taxes.
Finally, there’s the Heritage Fund, which the Alberta government created almost 50 years ago to save a share of the province’s resource wealth for the future.
In her 2024 budget, Premier Smith earmarked $2.0 billion for the Heritage Fund this fiscal year—almost the exact amount spent on corporate welfare each year (on average) between 2007 and 2019. Put another way, the Alberta government could save twice as much in the Heritage Fund in 2024/25 if it ended corporate welfare, which would help Premier Smith keep her promise to build up the Heritage Fund to between $250 billion and $400 billion by 2050.
By eliminating corporate welfare, the Smith government can create fiscal room to reduce personal and business income taxes, or save more in the Heritage Fund. Any of these options will benefit Albertans far more than wasteful billion-dollar subsidies to favoured firms.
Authors:
Alberta
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