On Sept. 3, former Saskatchewan finance minister Janice MacKinnon stood beside current Alberta Finance Minister Travis Toews to discuss the blue ribbon panel’s report and recommendations on Alberta finances.
They were incredibly blunt in their assessment that Alberta has a spending problem.
The 26 recommendations effectively put all public institutions in Alberta on notice, including the City of Red Deer and Red Deer College.
Like businesses or households that experience a sudden drop in income, and must adjust their finances accordingly, so must government entities reliant on the taxpayer adapt to changing circumstances.
The Sept. 5 edition of the Red Deer Advocate article, “Council fears budget cuts to follow panel report,” along with Mayor Tara Veer’s column, “Public safety and economy top city council’s agenda,” made clear the City of Red Deer has this issue on their radar.
It is the report’s 15th recommendation that looks to align municipal funding to provincial goals, priorities and fiscal capacity, adjusting funding to be in line with comparator provinces, and establishing accountability mechanisms to monitor the performance of and delivery of municipal programs and services and value for money spent.
Page 55 and 56 of the report notes that “Capital grants to municipalities make up a quarter of all provincial spending on capital. Alberta flows roughly $440 per capita in municipal capital grants, which is over 20% higher than the national average.
“Between 2007/08 and 2017/18, provincial revenues per capita have increased by 2%. Over the same time period, municipalities have experienced significant revenue growth of 48% per person … primarily driven by municipal property tax increases.”
The report goes on to say, “The province can’t afford to maintain existing levels of municipal support — levels that far exceed those of other provinces — and drive up provincial debt, while municipalities have tax room and yet rely on increasing provincial grants.”
The recommendation and accompanying excerpt unequivocally indicates that the City of Red Deer should expect significantly less funding from the provincial government than it has in the past — as it probably should have suspected as soon as it became clear Premier Jason Kenney and the UCP would form the next government.
For reference, the City of Red Deer received $12.5 million in operating transfers and $21.3 million in capital transfers from the provincial government in 2018.
In her column, Veer notes council has “asked (administration) for an additional $15 million in cost savings, operational efficiencies and adjustments over the next three years” for the 2020 budget.
If successful in finding $5 million in savings per year out of $358 million (based on 2018 budget), that works out to a 1.4 per cent reduction in spending — a sum unlikely to cover next year’s shortfall arising from reduced provincial transfers, and increase the tax competitiveness of the city.
For the past three years, the Red Deer & District Chamber of Commerce has advocated for the city to reduce spending and target a zero per cent increase in the operational budget.
This recommendation was made in consideration of the weak economy and increased competition from neighbouring municipalities.
It is positive to see the column from the mayor outlining a plan to address the economy and budget, yet it appears major changes will likely be imposed by the province in short order.
As a taxpaying resident and business advocate, I’m most excited about the recommendation of “establishing accountability mechanisms and performance measures to monitor the delivery of municipal programs and services and value for money spent,” so that we can gain a clear understanding of where our tax dollars go and the value and efficiency of the service delivery relative to other Alberta municipalities.
While it remains to be seen what exactly the change in provincial transfers to our city will be, and whether the province will flex its jurisdictional control regarding municipal spending, it seems exceedingly likely council will have tough decisions ahead as they weigh their choices to reallocate and reprioritize funds to maintain capital investments, make serious reductions in spending, or implement substantial increases in taxes and user fees — an unpalatable option for residents and businesses still struggling through this weak economic time.
Reg Warkentin is the Red Deer & District Chamber of Commerce’s policy and advocacy manager.