Provincial Budgets Never Reflect Reality. Why Not?

There's always a huge gap between the politicized budget forecasts of Progressive Conservative governments in Alberta, and the audited budget facts from the Auditor General.

The one common theme of all the Progressive Conservative budgets of the last 20 years is the lack of transparency, accountability, integrity, and honesty. Prudent budgeting is a good thing, but political posturing and spin is not good fiscal planning.

So why do Alberta's Finance Ministers constantly project fiscal doom and gloom and demand cuts in programs? Is it the progressive side under promising so they can over deliver?  Or is it a way for the conservative side to under resource necessary public services setting up public sector service providers to fail so privatization can come to the rescue?

I’m not sure of the answer but I do believe that there has been in internal struggle within the Stelmach government between the progressive and the conservatives. Today's budget shows that this government's big tent is threadbare and fraying fast.

The tug-of-war between the Progressives and Conservatives is tearing at the fabric of the party.

This is clear given in the stark difference between last year's budget, and this year's. Last year, the Finance Minister painted a dire picture of multi-billion-dollar deficits and dwindling savings. The audited facts showed he was more than $2.6 billion dollars wrong on his deficit forecast.

A deficit forecast at $3.624 billion for the 2009-10 fiscal year in last year's budget, is stated as an actual result $1.032 billion in this years. Two years ago, he forecast that 2009-10 deficit to be $4.714 billion. So they were $3.7 billion wrong in their reckoning of a couple of years ago.

That's the context in which to see their forecasts of a $4.821 billion deficit in the current fiscal year and a $3.405 billion deficit in fiscal year ending March 2012.

How can this government be so far off in their budget projections year after year after year?

Because it chooses to. The Auditor General reckons assets and liabilities the way all households and businesses do. In this year's budget, the government doesn't even pretend that it follows auditor standards.

Here are the fiscal plan tables attached to the 2011 budget.http://www.finance.alberta.ca/publications/budget/budget2011/fiscal-plan-tables.pdf
On Page 78, you will find the government's balance sheet. The bottom line is labelled "Net Assets for Fiscal Policy Purposes."

That's quite different from the Auditor General, whose report of net assets is stated under "Consolidated Statements of Financial Position" on Page 27 of the document below.http://www.finance.alberta.ca/publications/annual_repts/govt/ganrep10/confinst.pdf

That's the difference between figures set out for "fiscal policy purposes" and the actual health of the province's finances.

So in the politicized reckoning, you will find a historical summary of the government's fiscal position, on page 88 of the document below:http://www.finance.alberta.ca/publications/budget/budget2011/fiscal-plan-tables.pdf

The "fiscal purposes" statement of net assets is $50.549 billion at the end of the 2010 fiscal year (line 22). The Auditor General states the net assets as $61.534 billion.

For "fiscal purposes" the government ignores the value of the tangible assets it has in schools, universities, colleges and hospitals. It has passed legislation called the "Fiscal Responsibility Act" compelling it to ignore these assets.

The Auditor General isn't allowed to pick and choose his own facts. He is bound by law to be honest, transparent and accountable. Moreover, that historical summary shows a surplus in each and every fiscal year from 1994-95: the years of the "debt and deficit" crisis Albertans were led to fear. (line 18).

This year's budget says we can afford to ride out the economic turbulence of the past couple of years. It comes down squarely on the progressive side, in its outlook and forecasts. The Conservative gloom has given way to Progressive optimism. But which version of this party should we believe?

On a non-consolidated basis, there was an annual operating deficit of $931 million in 2009, and $476 million in the year ended March 31, 2010. But when you consider all things in the Alberta fiscal accounts there is no deficit.

Why would you not budget in such a way that all things are considered? Why would you pick and choose your own facts, when it is so much simpler and easier to be honest, transparent and accountable? To display the integrity demanded by our constitutional principles of peace, order and good government?

Even though today's Ministers budget is markedly different from last year's Minister's budget, keep in mind that this government has a proven track record of misleading and deceptive budgeting.

We have come out of the worst global economic recession in 60 years, with a robust and healthy asset base of $61.5 billion.

That's Alberta's bottom line. That's where we start building a culture of fiscal responsibility.

If I earn the privilege of leading an Alberta Party government, I will start with smart budgeting; with open, honest, transparent budgeting.  Our budget process should be a model of integrity and accountability. We will release draft budget scenarios well in advance, explain the consequences of different options and actions.

We will invite Albertans' input. We'll listen, and then lead. All within a framework of fiscal responsibility: true to the fiscally-conservative values Albertans hold dear.

I will remain committed to creating and sustaining one of the most competitive tax regimes among the world's advanced democracies. I am committed to fostering a culture of innovation and enterprise to drive our growth.

If I earn the privilege of serving Albertans, my role will be to set the competitive framework and the strategic direction that will enable us to grow our wealth, our enterprise and our well-being.

Under my leadership the Alberta Party government's stewardship of public finances will be sound, sustainable, secure, and communicated in ways that are honest, transparent and reliable.

 For a more detailed analysis please visit my webpage at http://www.glenntaylor.org/