Premier's vow of no tax hikes spurs fear of deep cuts: Economist forecasts deficit of more than $7 billion

Premier Ed Stelmach's declaration that there will be no tax hikes during his reign has some people bracing for brutal cuts to programs and services if the faltering economy does not quickly turn around.

While the premier suggested most provincial government departments can stand a "haircut," some groups fear the governments could be forced to axe programs or cut or freeze wages to balance the books.

Economist Jack Mintz said the financial picture is likely going to be worse than the forecasted$4.7-billion deficit. That's because natural gas prices are two dollars less than the budget estimate. For every 10 cents the price falls below the estimate, $126 million is lost.

"I wouldn't be surprised if we're looking at a deficit of more than $7 billion," he said. "There's more downside than upside risk."

Mintz, who teaches at the University of Calgary, said this year's deficit alone could eat up nearly half of the province's savings.

Liberal MLA Hugh MacDonald said the government will have to conjure up some magic to balance the budget without tax hikes. The Liberals tried unsuccessfully to introduce amendments that would have cut nearly $50 million from the budget.

"The government is not going to find $2 billion under a mattress somewhere," Alberta Federation of Labour president Gil McGowan said. "If they want to balance their budget with cuts alone, there will be deep cuts and they will have a huge impact. "

McGowan said such cuts may balance the books in the short term, but will cripple programs for years.

"It's bad news for those who represent public-sector workers and it's bad news for all Albertans. A return to Klein-style cuts is not in anyone's best interests."

Alberta Treasury Board president Lloyd Snelgrove predicted earlier this week that if tax increases were off the table, there would have to be a cut of at least 15 per cent to health care, education and social programs, and infrastructure spending would have to be cut 30 per cent. But Snelgrove was much more optimistic Wednesday after the premier made his declaration there would be no tax increases.

"We have to really sharpen our pencils," Snelgrove said. "We need to go back. We'll be sending targets out to the different departments sooner than later."

He said the government was "spending a little too much," but it now had to be careful it didn't cut too deeply. "We don't want to swing the pendulum past the point where we do damage to what in many cases are very good systems."

The Canadian Taxpayers Federation says cuts can be made without destroying programs.

"This is the biggest spending government in Canada, next to Newfoundland, on a per-capita basis," said Alberta director Scott Hennig.
"I don't think other provinces live in constant chaos just because they don't spend as much as we do."

Grant MacEwan political studies expert Chaldeans Mensah said Stelmach is taking a big risk with his vow not to increase personal or corporate taxes. In the short term, the promise will shore up the premier's support among fiscal Conservatives, with a leadership review looming this fall, Mensah said.

"In a sense, he has boxed himself into a corner and he has to be hopeful that economic conditions improve," Mensah said. "This will be a very telling moment for Ed Stelmach. He has set the stage for what will be a clear basis for judging him and making a very definitive judgment on his performance."

NDP MLA Rachel Notley called the vow "a blatant political ploy."

She added that Stelmach's decision to reverse the liquor taxes in the April budget that would have brought in $180 million was "incredibly irresponsible and thoughtless."

David Eggen, executive director of the Friends of Medicare, said Stelmach is "playing a dangerous game" and every cut he makes to social programs will be measured against his decision to reverse the tax on liquor. "He is lowering alcohol taxes when seniors will be paying more for prescriptions next year," he said. "It seems like he doesn't have his priorities straight."

Edmonton Journal, Thurs July 9 2009
Byline: Darcy Henton

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