The 2019 provincial budget outlines significant cuts to municipal funding over the next four years, but local officials are unsure how that will affect their budgets.
Over the next four years, the government plans to cut expenses by 2.8 per cent ($1.3 billion) in order to balance the budget from a current $8.7 billion deficit estimate to a $584 million surplus by 2022-23, according to the budget released by finance minister Travis Toews Oct. 24 in the Legislature. The expected cut for this year is 0.5 per cent.
One of the main funding cuts will be felt in the Municipal Sustainability Initiative (MSI). While funding levels will remain similar to previous years in 2019-2020, the provincial government will introduce cuts to the program starting in 2020-21, reducing MSI funding by $94 million and another $142 million in 2021-22, a nine per cent cut over three years.
MSI will be replaced by a Local Government Fiscal Framework in 2022-23, with a base pool of $860 million. Since the new framework also replaces the former initiative to separate the cities of Edmonton and Calgary under the City Charters Fiscal Framework Act, only $405 million will go to municipalities outside those two.
Significantly, the transfer payments will grow at half the rate of provincial revenue growth.
“Provincial support of municipalities (in Alberta) has led the average … in the country. We were elected on a platform to get a budget under control. This budget is doing it in a very practical way over a period of time. We cannot continue to move in a direction of further deficits and higher debt and think that that’s going to be helpful in the future,” said Athabasca-Barrhead-Westlock MLA Glenn van Dijken.
“What we’re indicating is that (municipalities) have an understanding moving forward of what the province is able to help finance with them, and that they will be making decisions based on that.”
County of Barrhead reeve Doug Drozd stated that Albertans gave the UCP a strong mandate “to get spending under control and reduce the deficit.”
And as such, Drozd said he wasn’t surprised that the 2019 budget included cuts to throughout budget.
Drozd added the county is expecting its MSI grant and Basic Municipal Transportation Grant (BMTG) to remain the same for the 2019 and 2020.
In a letter dated Aug. 15, Municipal Affairs minister Kaycee Madu stated the county’s interim MSI capital allocation would be $1,152,682 for 2019. The sum includes $470,055 in BMTG funding.
Madu also states the county will receive an additional $172,023 as an interim MSI operating allocation. This includes $104,980 in Sustainable Investment funding.
Madu also noted the municipality would receive $710,548 in Gas Tax Funding (GTF). Although it is a federal program the GTF is administered by the province.
That still leaves the question of what will happen in future years. Drozd noted that from 2020 to 2022 reductions are expected to be nine per cent annually.
“The County of Barrhead has always invested our MSI and BMTG wisely, saving it over multiple years and investing it on projects that do the most common good for residents,” Drozd said.
“What is not clear yet are the downloads of services from the province to the County of Barrhead ... we will work with the government to reduce the impact on our budget.”
Town of Barrhead mayor Dave McKenzie also wasn’t surprised about the reductions to the MSI funding.
“We anticipated that there would be some serious cuts to municipal funding, particularly to MSI,” McKenzie said. “The cuts were pretty deep and we’ll have to see how things shake out, but municipalities rely on MSI funding for its infrastructure projects.”
Like the county, the town received a letter in August from Madu telling them how much they would receive in MSI and GTF funding. Its 2019 interim MSI capital allocation would be $645,460. The sum includes $243,104 in BMTG funding.
The town will receive an additional $141,277 as an interim MSI operating allocation. This includes $97,316 in Sustainable Investment funding. The letter stated they would receive an additional $517,430 for GTF.
Even with that information, McKenzie said it will take some time for the municipality to go through the entire budget line by line in order to truly understand what impact it will have on Barrhead. Luckily, they have some help on that front.
“The AUMA [Alberta Urban Municipalities Association] has the resources to dissect the budget and get to the meat of what impact it will have for its members,” he said.
McKenzie added that although MSI funding wasn’t impacted this year, it still could have major ramifications on this year’s municipal budget.
“With our budgets, we need to have a three, five and 10-year plan and we have to keep that in mind when we budget out projects. This could impact what projects we might want to complete now and those that can wait,” he said.
Meanwhile, the AUMA expressed disappointment at the new fiscal framework for municipal funding, saying it will fail “to address the long-term infrastructure needs of Alberta’s communities.”
“While the province reduces its budget by 2.8 per cent over the next four years, it has proposed reducing our infrastructure funding by almost 10 times that amount. With municipal governments currently facing a multibillion-dollar infrastructure deficit, these funding cuts will lead to crumbling community infrastructure or higher taxes for property owners for years to come,” said AUMA president Barry Morishita in a release.
van Dijken, on the other hand, finds Morishita’s representation to be inaccurate. According to the MacKinnon Report, he said, Alberta has some of the newest infrastructure in the country.
“I don’t think we’re going to see crumbling infrastructure. To make that claim would be then to say that infrastructure is crumbling through this country … Our move to reduce our capital plan from $7 billion to $6 billion will put us in line with other jurisdictions. We’re matching their spending and we’re already newer and better. I don’t see it crumbling,” he said.
Rural Municipalities of Alberta (RMA) president Al Kemmere said he was pleased to see the MSI’s funding remain stable for 2019-2020 and supported the idea of a new Local Government Fiscal Framework in that it represents continued collaboration between the province and municipalities.
“However, under this new Framework, we are concerned that funding will grow at only half the rate of provincial revenue each year, as a predictable funding program should reflect a full connection to provincial revenues,” Kemmere said.
“We look forward to working with our provincial partners to solidify sustainable and predictable municipal funding that builds strong communities moving forward.”
It should be noted that the projected 2.8 per cent cut in the provincial budget is contingent on at least two pipelines getting built over the same time period.
Toews suggested that without Line 3 being active by the first quarter of 2021, and Trans Mountain by the end of 2022, cuts to provincial budgets could be as deep as $3 billion.
The government is also promising a reduction in corporate tax from 12 per cent to eight per cent over the next four years. It has already been reduced to 11 per cent.
The argument is that a low corporate tax makes Alberta a competitive business environment, and any additional revenue from the tax cut can be spent on hiring more people.
“I believe that investment will come back to our jurisdiction when they recognize that they have a government that will work with them into the future. The main goal of the budget is to strengthen the economy and return jobs,” said van Dijken.
The size of the public sector will also be reduced by 7.7 per cent over four years, meaning job cuts and hiring restraints across the board.
Education funding will remain the same over the next four years for K-12, but the government is working on a new framework for September 2020.
The province is expecting to quadruple the number of student and full-time apprentices by 2023, spending $4.3 million for 6,000 positions through CAREERS the Next Generation.
Advanced education expenses are expected to drop 12 per cent over the next four years, mostly from a reduction of Campus Alberta Grants. Instead, funding will be reallocated toward the skilled trades.
“The plan is focused on delivering skilled people for the needs of the province. We bring in people from all over the country for skilled trades. So let’s develop those people at home,” said van Dijken.
Another $10 million will go to fund Women Building Futures. Community and Social Services will see an increase of 7.6 per cent over four years, with more money going to disability services and Alberta Income for the Severely Handicapped (AISH). However, the latter is being de-indexed, meaning that it will no longer change according to inflation.
Agriculture and Forestry will be reduced nine per cent this year, 15 per cent by 2023.
Also suffering cuts are Culture, Multiculturalism and Status of Women (down to $158 million by 2023), and Economic Trade, Development and Tourism, which will be cut to $277 million by 2021.
