Alberta Party: Massive Deficit, NDP Inaction on Operational Spending puts Alberta Firmly on Track for Future Credit Downgrades

Alberta Party: Massive Deficit, NDP Inaction on Operational Spending puts Alberta Firmly on Track for Future Credit Downgrades

By Meagan Wade

EDMONTON, AB – February, 2016 – Alberta Party Opposition Leader Greg Clark is deeply troubled by the ND Government’s lack of action on operational spending and sees a big risk of future credit rating downgrades from Alberta’s historic anticipated budget deficit.

“The fact they have no plan to curb operational spending is contributing to an unprecedented projected $10.5B budget deficit,” said Clark. “There’s no question Alberta is on track for further credit rating downgrades.

More troubling, Clark expressed concern that this year’s deficit was artificially lowered substantially because a significant amount of capital spending is unable to be deployed, noting the third quarter fiscal update deferred $948 in capital spending to future years.

“Investing in infrastructure only works if you can deploy your capital,” said Clark. “If the NDs are unable to do so jobs aren’t created and badly needed infrastructure isn’t built when needed. Stimulus only works if you can get it working, and the NDs don’t seem able to do it.”

Clark is deeply concerned that $25 million has been cut from Alberta Enterprise Corporation, impacting Alberta’s efforts to diversify our economy.

“I find it alarming the government would cut support for entrepreneurs at a time when diversification is badly needed,” said Clark. “AEC is a critical tool for market-driven diversification. I worry the NDs will take a centralized, government-driven approach to diversification.”

Clark also noted that while health costs are up across the board, only physician compensation was singled out.

“I find it troubling the NDs chose to single out physician compensation rather than overall health costs,” said Clark. “Overall health costs must be addressed, but that goes beyond just physician compensation. It’s unacceptable to single out one group.”

“In their first year in office the NDs haven’t shown they have a viable economic plan, and clearly aren’t willing or able to make the tough choices required to avoid further credit downgrades.

“This update gives me no confidence that anything has changed.”

Clark releases debt plan, says further credit downgrades will cost Albertans $660 million more

CALGARY, AB – February 25, 2016 – Alberta Party Caucus Leader Greg Clark has released a debt affordability analysis and recommendations for the Government of Alberta’s fiscal sustainability.

“Albertans expect more from this government,” said Clark. “If the NDs are going to be borrowing tens of billions of dollars, they need to do a deeper analysis of the costs of borrowing and show Albertans a clear plan to pay it back.”

The Alberta Party Caucus debt plan recommends the following:

1.       Always use the most conservative figure available for forecasting purposes

2.       Eliminate borrowing for operational spending

3.       Develop and implement a debt affordability analysis to be incorporated into the annual budget which includes a detailed analysis of different scenarios based on key metrics like debt to GDP, debt as a percentage of revenues and other measures

“The government should never borrow for operations,” said Clark. “If that means you need to make hard choices, then you need to make hard choices. Rather than borrow for operations the province needs to live within its means and control spending.”

Clark said there is a significant risk of further credit rating downgrades, which will increase Alberta’s debt servicing costs substantially.

“Our analysis shows Alberta’s debt servicing costs will increase by $660 million if we’re downgraded again,” said Clark. “Given the NDs lack of fiscal discipline another downgrade is likely.

“We need to see a clear plan from this government to stabilize Alberta’s finances and put us on a path to a balanced budget. The Alberta Party plan does that, and I encourage the NDs to accept all recommendations within this policy document.”

The Alberta Party Caucus debt analysis “Impact: How Government Decisions Affect Alberta’s Fiscal Sustainability” is available here.