There ain’t no place like Alberta

Alberta just came out with their 2010 budget last week.  It is a fun thing to read through if you are interested in such things. 

A couple of interesting things:

The life blood.  No other province in Canada (except NL) has the ability to go from deep deficit to a strong surplus without hardly ever lifting a finger.  Look at the revenue projections.  From $33.5B in the current year to $40.2B in three years – and those are based on fairly conservative oil prices.  A 20% rise in revenues.  Boom.

The gravy train.  $1.1 billion to agriculture – $700  million in straight subsidies.  Makes NB’s subsidies to industry look kind of piddly.   When I gently chide my Albertan colleagues about this I get the line about agriculture having to compete with European subsidies and the weather.   Uh huh.  As if New Brunswick manufacturers don’t have to compete with subsidies and the rise in the Canadian dollar.    Let’s face it.  Subsidies to industry are subsidies to industry.  It’s just that in Alberta it’s agriculture and oil (through very lucrative federal and provincial tax incentives to stimulate oil sands activity over the past 15 years) and in New Brunswick it’s other sectors.

Unfortunately, most provinces will have to inflict far more fiscal pain to get out of deficits.

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12 Responses to There ain’t no place like Alberta

  1. When you look at Alberta’s investments in health and education, the numbers are equally impressive. Though the gravy train for industry is strong, even Conservative Alberta understands that you have to invest in health and community or nobody will ever move there.

  2. richard says:

    David, how dare you suggest that AB’s wealth is due to the world demand for oil? Outrageous. Clearly, it all down to fiscal conservatism, low taxes and white cowboy hats! At the very least, NB should move in this direction – I demand subsidized cowboy hats for every NBer.

  3. Anonymous says:

    David, you forget an important caveat. Agriculture is a strange animal in Alberta´s economy, and that has A LOT to do with politics. A rural vote is worth more than an urban vote in that province — and that is what has kept the Conservative party in power for more than 30 years. In fact, if you dig deeper, you will notice that agriculture is perhaps the only sector that receives direct transfers from government (and maybe also, but a much lesser degree, forestry). But the sectors that are the bloodline of Alberta´s economy (oil, gas, construction, manufacturing, and so on), do NOT receive that kind of support.
    Two more things. There is growing pressure from the cities (Calgary and Edmonton hold about 2/3 of the province´s population) to redraw the electoral map (if that will happen, and when, is everybody´s guess). And if you followed Alberta´s politics, you would have seen that the recent cabinet shuffle (and the rise of the Wildrose Alliance) was in a large part driven by Calgary´s discontent.

  4. mikel says:

    “Gently chide” eh:)

    To be fair, Alberta relies on agriculture like NB relies on forestry. At 1/34th of the budget, that comes out to about 120 million for New Brunswick’s size budget. New Brunswick USUALLY contributes far more than that-you have to take into account that much of the land is crown land and NB’s various departments do work in those areas (forest rangers, while now few, work for the government but ‘work’ for the developers). I don’t have the figures for DIRECT subsidies, but there are programs for various forestry jobs at many levels, direct handouts and no interest loans (Irving just got 10 million just for making a threat).

    So we are really just talking about subsidizing industry and most provinces in Canada fare around the same, I think NB is worse in many respects (again, education spending as a percentage of the budget is the lowest in Canada).

    So one place looks like another, all have ‘competitive pressures’, and all blame ‘the other guy’. I don’t know why canadians have this thing about ‘chiding’ other canadians. I call it the ‘Olympic effect’, in that for some reason people like to take credit for accomplishments that are not theirs. So people in Alberta ‘take credit’ for a budget that mostly has to do with arable farmland, and oil.

    By the way, keep in mind revenue ‘projections’ are just that. Right now, like everyone else, Alberta has a deficit problem.

    By the way, happy ‘family day':)

  5. Anonymous says:

    @mikel

    “To be fair, Alberta relies on agriculture like NB relies on forestry”
    >> Mikel, that is not quite true. I recommend you take a look at the Alberta budget to get a better idea of how much of Alberta´s GDP is accounted for agriculture.
    One thing that I forgot to mention in my previous comment is the challenge that the oil and gas industry (and all the related industries, such as chemicals, petrochemicals, engineering, construction, metal and machinery manufacturing, etc.) present for the other sectors.
    Just think about this: imagine that you are a mechanical or electrical engineer working in another sector (medical devices, environmental industry, or aerospace, for example) and you are paid $100,000/year in “normal” times. But when an energy boom arrives, the energy and related industries are willing to pay you $200,000 and more. Where do you go? The answer is a no-brainer. A somewhat similar phenomenon occurs in other resource areas such forestry and agriculture. As a government, what do you do? How far do you go in providing incentives for other industries in order to reduce your dependence on one (very strong) sector?
    This is just food for thought, and to make the point that the issue is a little more complex than what I think David implies when he says that “subsidies to industry are subsidies to industry”.

  6. Anonymous says:

    @Anonymous

    >> Mikel, that is not quite true. I recommend you take a look at the Alberta budget to get a better idea of how much of Alberta´s GDP is accounted for agriculture.

    (correction: I meant Alberta´s revenue, not GDP; for Alberta´s GDP, check StatCan or the Alberta economic accounts. But the idea is the same)

  7. Anonymous says:

    @Anonymous

    For my two comments above, check out this link:

    http://www.albertacanada.com/documents/SP-EH_highlightsABEconomy.pdf

    (Agriculture: 1.9% of Alberta´s GDP in 2007)

  8. I understand the subtleties of your argument and I am not saying that all subsidies are bad all the time. I am just saying that people in glass houses (even those made with petrochemical-based glass) shouldn’t throw stones.

    Alberta has been a fiscal gravy train for the rest of Canada and I hope it will be again. It’s a vitally important part of this country and I appreciate how they are plowing profits from oil into building the life sciences and nanotechnology industries.

    But it is wrong to say that the Alberta government doesn’t use various kinds of incentive (cash and tax-based) to support industires like agriculture, film/new media and oil.

  9. Bill says:

    Just a note … while it’s likely true Alberta’s rural vote gets more emphasis than in other provinces, it would be a mistake to think an urban vote with more oomph would change anything. Edmonton leans a tad more left than the rest of the province, probably due to the presence of government workers and the U. of A. employees (the NDP does relatively well there), urban Alberta is still pretty darned conservative. The rise of the Wildrose Alliance is because the governing Conservatives aren’t conservative enough for some. The federal Conservatives get the same complaint. Urban or rural, Alberta is essentially conservative.

  10. Anonymous says:

    @Bill

    I agree. I would only add that the liberal alternatives in Alberta are pretty poor. A stronger urban vote could help broaden up these alternatives by bringing more liberal ideas to the political spotlight.

  11. Anonymous says:

    @David Campbell

    I get your point. I would just add one thing: the Alberta government has a policy of not providing direct cash incentives/help to individual, for-profit companies. There are a few (very few) exceptions, such as the agriculture sector. Perhaps because, as I implied earlier, the political weight of the rural vote. Even the forestry sector does not get this kind of incentives/help.
    Incentives to individual companies in the other sectors come, as you said, in the form of low taxes, assistance for the development of specific technologies (e.g. carbon capture and storage, bioenergy), and trying to maintain an overall competitive business environment.

  12. I agree with most of your points but there is a difference between a tax break/credit and general low tax rates. The Alberta film development credit of up to 29% of total production costs – has a straight cash value.
    http://www.pwc.com/en_CA/ca/entertainment-media/publications/big-table-film-video-2009-09-01-en.pdf

    It is true that places like New Brunswick sprinkle around the incentives to more companies in more sectors.

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