Alberta may get cash injection from little known federal program
A steep fall in revenues due to sliding resource prices could result in the province qualifying for the so-called fiscal stabilization program.
Oil & Gas
Liberal Party of Canada
OTTAWA — The Liberal government is eyeing a little-known federal program as it searches for ways to help Alberta cope with the financial squeeze of sinking commodity prices, The Canadian Press has learned.
The Alberta government is bracing for a steep fall in revenues in 2015-16 due to sliding resource prices, which could result in the province qualifying for cash relief from Ottawa through the so-called fiscal stabilization program.
Provinces can make claims under the program when their revenues tumble by more than five per cent from one year to the next.
But at roughly $250 million, the maximum withdrawal Alberta can claim under the program’s current formula is relatively modest for the province’s economy. Payouts were capped in the late 1980s at $60 per provincial resident; Alberta’s population is about 4.1 million.
A fiscal-stabilization payment is just one of several possibilities Ottawa is exploring as it hunts for ways to ease the pain of hard-hit Alberta, said a senior government source who spoke on condition of anonymity.
As it draws up its spring budget, the federal government has instructed bureaucrats across many departments to come up with “innovative ideas” to help the Alberta economy, said the source, who wasn’t authorized to disclose details publicly.
With the federal budget’s release expected in March, and the province’s treasury facing pressure, the clock is ticking.
The source said potential solutions being floated include speeding up infrastructure spending and tweaking the typical, per-capita infrastructure funding disbursement formula to reflect economic need. Another possibility under consideration is a boost to direct transfers to individuals, perhaps through adjustments to the employment insurance program.
The Liberal government pledged to enhance EI during last fall’s election campaign and Prime Minister Justin Trudeau has pledged to pump an additional $60 billion over 10 years into infrastructure projects. However, only $17.4 billion was earmarked to flow during the Liberals’ first four-year mandate.
Next week, Trudeau is scheduled to visit Alberta, where the Liberals had an electoral breakthrough in October by winning four ridings. Before that, the party hadn’t won a seat in the province since 2004.
Alberta Finance Minister Joe Ceci told The Canadian Press in an interview that he’s hoping to discuss his province’s battered books with his federal counterpart, Bill Morneau.
“Certainly, I’m aware that there are some things that we could be following up with together to possibly improve the situation temporarily around the availability of federal monies,” Ceci said.
“I would just discuss finances with (Morneau) and I’m interested in seeing if there’s any possibility we can count on federal monies in the near term that would help us through this difficult time.”
Ceci didn’t get into specifics, but when asked whether he might ask Ottawa for a loan, he replied: “Yeah, potentially.”
Asked for more details, Ceci’s press secretary later said the minister was “really just musing about potential options” when he raised the possibility of requesting financial help from Ottawa.
Leah Holoiday stressed that Ceci remains focused on seeing federal infrastructure investments fast-tracked and more support for getting pipeline access to tidewater.
Ottawa is well aware of Alberta’s significance when it comes to economic growth across Canada, said the federal source.
“Alberta is almost 20% of Canada’s (gross domestic product) even though it’s only 11% of the population,” the source said.
“Alberta’s dragging down the entire Canadian economy.”
When it comes to a more targeted approach to helping Alberta, another senior federal source described a recent article written by University of British Columbia economist Kevin Milligan as making a lot of sense.
Milligan argued that regional strategies are more helpful than a nationwide plan to stimulate the economy because the oil-price shock only causes significant problems in certain areas.
In an interview, Milligan also pointed to EI enhancement as an adjustment that can provide well-targeted, quick relief to the hardest-hit regions, where job losses have been piling up.
The fiscal stabilization program could be another form of assistance, added Milligan, who said he had never heard of it.
“One of the reasons why fiscal federations are a useful thing is that we provide insurance,” Milligan said. “When one region is doing well, we scoop a little off the top and share it around, as we do with our equalization.”
Equalization payments are designed to transfer funds from so-called “have” provinces, those on a more secure financial footing, to their “have-not” counterparts.
Because it’s calculated on a three-year average, this year’s equalization formula calls for Alberta to continue to pay into the program, even though it is reeling from a precipitous drop in oil prices.
Morneau has rejected calls to tweak the controversial equalization formula, saying that fiddling with the program would be complex.
But Milligan said the federal government might consider adjusting the fiscal-stabilization program to provide more relief to Alberta.
In October, the Alberta government predicted its revenues would drop 11.5 per cent from 2014-15 to 2015-16. Milligan said it could be worse than that, since oil prices have continued to fall.
Albertans are “hurting,” Ceci declared.
“We’re doing what we can here in Alberta to take care of each other, but federal government public sector investment would be a significant help at this time.”
© 2016 The Canadian Press