April 22nd, 2021

Budget under scrutiny

By Lethbridge Herald on February 26, 2021.

Tim Kalinowski

Lethbridge Herald


In Aesop’s parable the “Birds, The Bats and The Beasts” a bat first flies up into the air to seek friendship with the birds who reject him because he is not a bird. He then flies to the beasts of the earth who reject him because he has wings, and is not like other beasts. The moral of the fable, according to Aesop, is ’he who is not one thing, or the other, has no friends.’

The UCP government may have been feeling a bit like that the day after releasing their 2021 budget with opponents like the Canadian Taxpayers Federation assailing them for running huge deficit budgets for the next three years and big spending, and groups like the Alberta Federation of Labour and the Opposition NDP pummeling them for cutting 15,000 more public sector jobs, and cutting spending to support post-secondary institutions while “blowing,” in their words, upward of $2 billion on gambles like the Keystone XL pipeline.

Lethbridge College political science professor Faron Ellis said while it is true the UCP has shown a particular talent for ticking off both sides of the political spectrum at times the past two years, and thus its current position trailing behind the provincial NDP in the polls, he was not sure all the criticism was warranted in this instance.

“It is essentially a don’t rock the boat type of budget,” he explained. “It demonstrates sort of a shift in the Kenney government’s approach. Where they have had issues over the first two years of their mandate is when they have barged ahead with their plans without being sensitive to the realities in public opinion as well as in other aspects of Alberta life and the economy. This budget clearly indicates, for whatever reason, they have decided to recognize reality and admitted it is going to be impossible to balance the books in this term.”

As for the criticisms, Ellis said the Kenney government is clearly never going to be seeking friends or support in the public service. As for groups like the Canadian Taxpayers Federation, Ellis said, unlike third party advocacy groups with no stake in actual governance, “you can’t find a government in the Western World right now that is not radically overspending given the pandemic.”

Similarly, Fraser Institute Senior Fellow and University of Lethbridge associate professor Danny Le Roy is also not willing to throw the UCP completely under the bus over its budget, even though he has serious concerns with the government’s spending.

“It is easy to be critical, but, in my opinion, I think they got it half-right,” he said. “The half that is correct is that there are no new taxes, which is notable. The one-half they didn’t get correct is on the spending side. This government doesn’t have a revenue problem, it has got a spending problem.”

Le Roy does not accept the excuse of the pandemic the UCP has put forward to justify its deficit spending. He notes the UCP’s previous budget, prior to COVID, was also a deficit budget. As have budgets through three successive governments, and three separate political parties, in Alberta in nine out of the last ten years.

“If you were in a situation where your income was compromised,” he stated, “the first thing an individual would choose to do if their income stream was reduced is you would reduce your level of spending. You can only put things on a credit card for a limited period of time. The same is true with the provincial government.”

Opposition NDP Finance Critic and Lethbridge West MLA Shannon Phillips, on the other hand, has no doubt about where the failures of the UCP budget lie.

“There is no vision for jobs,” she told reporters at a press conference held in Calgary on Wednesday, “and for creating wealth and prosperity in Calgary or throughout Southern Alberta, throughout the province more generally, and that is most certainly a fail. This was an opportunity to meet the moment of the considerable economic challenges the province has right now, and they utterly failed to meet this moment.”

She condemned the government for spending almost $2 billion on the Keystone XL pipeline gamble while at the same time saying it has no money to properly fund post-secondary education, and that it must lay off 15,000 public sector workers.

“These are not faceless, government workers,” she stated. “These are nurses. These are your paramedics. EMS workers. They are people who are working in the Children’s Services system. They are keeping families together. They are social workers. They are ensuring that prosecutions happen. They are ensuring serious organized crime is investigated. That is what is contained within those massive reductions. So, at the end of the day, what Albertans can take from that is Jason Kenney has told them when they need the healthcare system, or when they need seniors’ care, there will be 15,000 fewer people there to meet those needs.”

Lethbridge Mayor Chris Spearman, who has not been shy to criticize the Kenney government in the past, took a more moderate view.

“The good news is there are minimal impacts on municipalities,” he told reporters on Wednesday. “We are concerned about future reductions in MSI, but there are no significant cuts to immediate municipal funding, and no impacts or reductions on municipal revenues.”

Spearman said he was relieved the provincial government decided to hold the line on education property taxes, and did not impose a hike as expected.

“I think that is positive,” he said. “We had done our best to maintain a zero tax increase overall. It’s important that businesses and homeowners understand there will be fluctuations up and down the tax classes, but overall we have stressed a zero revenue increase. We have tried to reduce everywhere possible in order to sustain zero tax increases for two years. And to have the education tax co-ordinate with that is great.”

Spearman did criticize the provincial government for being slow to deliver on much-needed social services such as supportive housing in Lethbridge, and for the cuts to post-secondary institutions.

The extent of those cuts became more clear by Wednesday morning.

According to a letter sent out to employees at the University of Lethbridge by President Mike Mahon the cut to the university was about 6.2 per cent, (about $6.4 million), which was $750,000 beyond what had previously been communicated by the provincial government.

“This increased reduction will mean additional work is needed to bring a balanced budget to the University of Lethbridge Board of Governors later this spring,” Mahon wrote.

Lethbridge College President Paula Burns confirmed in a letter sent out to her employees Wednesday the college would be cut back by 6.4 per cent, which was also greater than they were previously informed by the government.

“Although we were aware of a reduction to our operating grant for the coming year, we were disappointed to hear it was more than anticipated and is a 6.4 per cent reduction to our grant for 2021-22, which is about $2.7 million. This is a significant challenge to not only our college, but to all post-secondary institutions and the post-secondary education system across the province,” Burns said.

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Kal Itea

Jason should read this and take heart in instead of flogging a dying dog:

theglobeandmail.com Opinion: Message from the Norway wealth fund to oil sands companies: Clean up your act or sufferEric RegulyEuropean bureau chief
6-7 minutes
Norway’s US$1.3-trillion sovereign wealth fund, the world’s biggest, continues to lose interest in grubby resource companies. Last month, we learned it blacklisted 15 businesses in 2020.
Four were Canadian, each an oil sands player: Canadian Natural Resources
CNQ-N -2.81%

, Cenovus EnergyCVE-T +0.32%

, Imperial OilIMO-T -2.38%

and SuncorSU-T -3.03%

. “We divest from companies where we no longer want to be a shareholder for ethical or sustainability reasons,” the fund said. “By not investing in these companies, we reduce our exposure to unacceptable risks.”The fund, which owns on average 1.4 per cent of every listed company in the world and generated a return of US$123-billion last year, was sending yet another message that the era of Big Oil is coming to an end and the future belongs to renewable energy players.
It’s easy to accuse the fund of blatant hypocrisy. Its fabulous wealth was built on Norway’s abundant offshore oil and natural gas riches, and it continues to invest in hydrocarbon companies, though less so every year – last year’s tally was 225, down from 311 in 2019. It’s also happy to ignore the credible efforts of the four banished oil sands companies to lower their carbon intensity.
But never mind. The four remain big emitters of greenhouse gases – they had to go. Some significant Japanese and European investors have already ditched their oil sands investments, and others will follow.
For all oil companies, especially those of the oil sands variety, the trend is clear and unsettling. Vanishing investors will make it harder for them to raise capital, boosting the cost of doing business. As their market values fall, index funds that seek out companies with big market values will have to give them a pass (rebounding oil prices have boosted values in recent months, though almost all oil companies are still down in the past year).
Higher carbon prices will intensify the misery. The European Union, for instance, is counting on carbon pricing to drive down emissions. The EU is targeting a 55-per-cent drop from 1990′s level by 2030. It runs the world’s biggest emissions trading scheme. Carbon allowances have already gone from €8 a tonne in 2018 to €40 today and may have to double to encourage all industrial companies, from oil and shipping to utilities and automobiles, to achieve net-zero emissions.
What are oil companies, especially those in the oil sands, to do to save themselves? Reducing their Scope 1 and 2 emissions – those directly related to their operations, the result of burning diesel fuel for trucks and generating electricity purchased from nearby power plants – can only go so far. Barring breakthroughs in technology, the yearly reductions will be relatively small.
Vancouver’s Teck Resources is speeding up the process by getting out of the oil sands. Its 21.3-per-cent stake in the Fort Hills project, operated by Suncor, is for sale. Unloading it won’t be easy in a market that is becoming aggressively anti-oil sands.
BP has the most radical idea so far. It plans to reduce its oil and gas production by 40 per cent by 2030 and drop its refining output by 30 per cent. Its emissions will fall correspondingly, a massive clean-up act that, so far, has not caught investors’ imaginations because less oil out the door means less cash flow.
But BP, and other oil companies planning similar makeovers, may pick up momentum if they go from Big Oil to Big Energy, which apparently is BP’s plan. Twenty years ago, it rebranded itself from British Petroleum to Beyond Petroleum. The idea was to keep emissions flat and dive into the renewable energy business. The rebranding made little progress and was dropped after a few years.
But the climate debate, renewable-energy technologies and investors’ attitudes toward highly polluting companies have changed a lot in the past two decades. Investors don’t want to prop up old oil companies; they want to propel green energy companies into the big leagues, and it has worked amazingly well so far.
Most of the new energy giants began life in the hydrocarbon business – oil and gas production, oil refining or coal-powered electricity generation. They’re busy burying their hydrocarbon pasts and diving into solar, wind and hydro power.
The ones with the greatest success so far are Orsted of Denmark, which evolved from a national oil company into the world’s biggest offshore wind company; Enel of Italy, Europe’s biggest utility and the top renewable energy producer outside China; Spain’s Iberdrola, the world’s third-biggest utility en route to becoming a global clean-energy powerhouse; and NextEra, America’s largest renewable energy producer.
All four of them were flying under the investor radar a decade ago. Today they are superstars, and their market values are approaching, and sometimes exceeding, those of the oil biggies. On Friday, Enel had a market value of US$97-billion, about US$10-billion more than BP’s.
Can the Canadian oil sands companies pull off similar transformations? Not easily, since they are well behind in the renewable energy game. But what choice do they have but to try? Norway’s decision to banish them is not a one-off punishment. Their shares will remain in the doghouse unless they realize that the oil sands are a sunset – and unloved – industry.
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Follow Eric Reguly on Twitter @ereguly

Southern Albertan

Key words in this post…..” (UCP) trailing behind the NDP in the polls.” This holds not only because right wing voters are looking elsewhere to park their votes, but 6% of former UCP voters now say they will vote for the NDP next time around. Alberta folks can be fooled for only so long by the Kenney UCP. They have even managed to alienate agribusiness UCP voters because of the open-pit coal mine fiasco and the threat to the Oldman River watershed. Good on the Kenney UCP! I hope they keep up the good work of alienating more Alberta folks!
Expect things to get worse though. The loss of 15,000 more jobs could drive Alberta deeper into recession yet, particularly without addressing other avenues of revenue. And the cuts to education, (technical institutions, colleges, universities) is very unwise. Smart countries/jurisdictions do not scrimp on education because they want to be the top of blue and white collar heaps because they know it is good for their economies. This keeps up and Canadian students will have to look elsewhere in the world for more affordable postsecondary education or not get educated, and the only students who might be able to afford the increased tuition here might be from foreign countries.

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