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Commentary / Alberta budget 2019 and its impact on PSE and the province

Commentary / Alberta budget 2019 and its impact on PSE and the province

By Ricardo Acuña

On October 24, 2019 Alberta’s new UCP government headed by Jason Kenney delivered its first provincial budget. The budget, as expected, leaves virtually no part of Alberta’s public spending intact as it promises to deliver overall cuts in program spending of 2.8 per cent over the next four years. This is in addition to the virtual cuts that will result from not adjusting for the 18.1% projected increases in costs due to population growth and inflation over the next four years. Public sector employment will be reduced by 7.7 per cent over the next four years, and income supports for Alberta’s neediest are being de-indexed from inflation.

For some sectors, like health care and K-12 education, nominal spending will remain largely the same but the refusal to adjust funding for enrolment growth, population growth, and an aging population will mean significant cuts, job loss, and service reductions over the next four years.

The biggest winners in the budget are the province’s corporations who will see their corporate taxes reduced by 4 per cent by 2023, meaning they will pay some $4.7 billion less in taxes over the next four years.

The biggest losers, by far, in Alberta budget 2019 are the province’s post-secondary students and the institutions they attend. Overall the budget for advanced education is being cut by 5.1 per cent this year, and by a total of 12 per cent by 2023.

The total cut for this year, $117.6 million, is being delivered differentially across the province’s 26 post-secondary institutions, with six not receiving any operating cuts this year and the rest receiving anywhere between 1.1 per cent and 7.9 per cent. For institutions like Grant MacEwan University and Bow Valley College, both of who have been allotted the highest cuts at 7.9 per cent, this means a loss of $9.1 million and $3.5 million respectively. The province’s two largest institutions will each receive 6.9 per cent in cuts this year, resulting in a loss of $44.4 million at the University of Alberta, and $32.9 million at the University of Calgary.

In addition to the cuts in operating grants, the government announced the complete elimination of funding under the Infrastructure Maintenance Program. This represents a further loss of $35 million for the University of Alberta, $22 million for the University of Calgary, $3 million for McEwan, and so on down the line for all of the Province’s institutions.

Because the budget is for the 2019 provincial fiscal year, all of these cuts are retroactive to April 1, 2019, meaning the institutions, who are prohibited by law from running deficits, will need to find all this money in their budgets mid-way through the academic year.

For post-secondary students, the budget lifts the five-year-old tuition cap, allowing schools to increase tuition by up to seven per cent in each of the next three years. The government has also completely eliminated the Alberta tax credit for educational expenses, and increased interest rates on provincial student loans by one percent.

Going forward the budget documents make clear that a new funding formula will be introduced which was to tie grants to each institution’s performance in key areas like completion rates, post-graduation employment, provision of skills relevant to current and future labour markets, commercialization, grant revenue, and a number of other metrics.

Kenney’s UCP government asserts that the rationale for all of these decisions can be found in the results and recommendations of a Blue Ribbon Panel it appointed to study Alberta’s finances and recommend a path to balance that does not include increasing existing taxes or introducing new ones. In the section on advanced education the panel, chaired by former Saskatchewan Finance Minister Janice McKinnon, found that Alberta spends significantly more on a per-student basis than the comparator provinces of Ontario, Quebec, and BC, with poorer outcomes, including lower participation rates and lower completion rates. The goal, according to advanced education minister Demetrios Nicolaides, is to make advanced education in Alberta more efficient, yield better results, and less dependent on government funding.

The government provides no explanation for how increasing tuition by 21 per cent, eliminating tax credits, and increasing the cost of student loans will increase participation rates and completion rates among a student-age population that is already the most indebted in the country. They likewise ignore the reality that gutting the sector financially will actually drive away the kind of talent that attracts research grants, commercializes research, and generates best-in-class results for students.

­One of the key problems with the government’s decision is that they appear to be fully premised on faulty research. As with every part of McKinnon’s Blue Ribbon Panel Report, the recommendations around post-secondary education arise from purposefully narrow calculations and faulty comparators. For example, McKinnon’s use of per-student funding to portray Alberta’s over-spending completely ignores the economic context of Alberta’s higher GDP, higher inflationary costs, and higher personnel costs across all sectors of the economy. Likewise, using Ontario as one of only three comparators ignores the fact that, due in part to large number of institutions in Ontario and the sheer size of many of them, Ontario has historically been an outlier in terms of per-student costs.

Had McKinnon factored in Alberta’s high GDP and costs, and done the comparison across the country, she would have found that post-secondary spending in Alberta is not out of line with the Canadian average. In fact, when government expenditures on post-secondary education are calculated as a percentage of GDP, Alberta’s are the third lowest in the country and almost exactly equal to the Canadian average.

The sad reality is that, despite the Alberta government spin, this budget will deliver a greater cut to post-secondary funding in Alberta than at any time since the depression. As a province still deeply dependent for its economic viability on a single resource that the world is increasingly looking to replace, Alberta needs education and research for innovation, diversification, and creativity today more than ever before. Budget 2019, with its increased costs to students, reduced accessibility, decimated ability to deliver high quality education and research, and threats of imposing dubious outcome metrics, has instead insured the opposite — that Alberta will remain short-sightedly focused on a rapidly declining sunset resource while the rest of the world moves on.

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Ricardo Acuña is executive director of the Parkland Institute, a public policy research institute based in the Faculty of Arts at the University of Alberta.

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