Alberta is digging itself deeper and deeper into debt.
It was not too long ago when Alberta achieved the unthinkable — debt-free status.
The province was the envy of jurisdictions throughout the country as Alberta rode its vast resource revenues to place itself in an unprecedented financial position.
That was augmented by an aggressive cost-cutting strategy, which created massive infrastructure deficits across the province. Some of those delayed or cancelled projects have certainly come back to haunt successsive governments, who struggled to balance the need for improved infrastructure with increased costs and declining oil and gas revenues.
Yet spending ballooned as Alberta became the envy of the rest of the country for a much more dubious reason, as our per-capita spending began to dwarf that of our neighbours.
Today, it has led to a perfect storm, where resource revenues have plummeted, infrastructure projects are more expensive than ever and spending on public services continues to climb. Population growth also factors into the equation, as Alberta is not only playing catch-up in some cases, but also must plan for expansion in areas such as health care and education.
It has all led to rising debt in Alberta, debt which could impact the province’s triple-A credit rating, according to the July report from Moody’s Investors Services.
With infrastructure investments continuing at a heavy pace, Moody’s predicts Alberta’s debt burden could reach 60 per cent of revenues in the near future, up from the current figure of 30 per cent.
Much is riding on the new government’s budget, as the Moody’s report pointed to the lack of a plan to bring about fiscal balance or to rebuild reserve funds which have been syphoned off at an alarming rate.
Already, Alberta’s debt has grown to the point where debt-service costs will ring in at $714 million for 2014-15. Our debt is now listed at $11.9 billion, a figure which grew by $3 billion in 2014-15 alone. It is conceivable to picture a point in the very near future where the province will be paying $1 billion a year in debt costs alone, a staggering figure which would have seemed inconceivable not too long ago?
The question becomes, what are we going to do about it?
The NDP government has promised to return to balance in four years, by 2018-19, by which point Alberta could sink even deeper into debt. Certainly, it is going to take time to dig out of the financial hole we have dug for ourselves. Unless oil and natural gas make dramatic recoveries, some massive adjustments are going to be needed.
Efforts to lessen our dependence on resource revenues must continue, as do steps to ensure we are spending every last penny as efficiently and wisely as possible. With new leaders in place, the time is now to change the financial direction of this province.