Alberta budget expected to deliver bad news

It has been called everything from a bad news budget to a document that will fundamentally change the lives of all Albertans.

Bold words or hyperbole?

Albertans will find out when Finance Minister Robin Campbell delivers the highly anticipated and potentially game-changing plan for how the province spends and saves in the wake of a dramatic drop in oil prices.

Some things are already known about the upcoming budget: the possibility of a return to health-care premiums;a renewed long-term investment in the Heritage Savings Trust Fund; and the overall theme of how to do more with less.

These ideas have been floated by Premier Jim Prentice for months. Dire predictions have peppered each speech hes given since oil prices started plummeting shortly after he took office last fall.

Prentice has made it clear the province needs to get off the "roller-coaster" of energy revenues and that other sources must be found to make up the $7-billion shortfall expected this budget year, an amount equal to the provinces entire education budget.

Revenue diversification

What those other revenue sources are will be a key part of what to watch for in Thursdays budget. Prentice has declared he will not introduce a provincial sales tax, but he has not ruled out changes to Albertas 10 per cent flat tax.

There could also be an increase on cigarettes or liquor, the so-called sin taxes an option favoured by many of the 40,000 Albertans who responded to a budget survey in February.

In Tuesdays televised speech, Prentice hinted at a return to health-care premiums or a levy, seven years after they were scrapped by then premier Ed Stelmach.

"We will be asking Albertans to begin to contribute directly to the costs of the health system," Prentice said.

That will likely not be a popular choice. Fifty per cent of people who filled out the budget survey opposed health-care premiums. Respondents preferred a hike to tobacco taxes, a higher corporate income tax rate and the introduction of graduated personal income taxes as ways to increase revenue.

In the fall speech from the throne, Prentice also hinted at toll roads as a potential source of revenue, an idea that may resurface in the budget.

Regardless of whether taxes are introduced or increased, Prentice will reinforce, again, that Alberta still has the lowest taxes in the country.

A return to the '70s?

Savings and oil revenues are interconnected in Alberta and have been since the 1970s when thenpremier Peter Lougheed introduced the Heritage Savings Trust Fund.

In the early days, 30 per cent of oil revenues were moved to the fund, with the remainder going into general revenues. By the mid-1980s, the tide shifted and all the oil revenues were put into the government spending pot.

Prentice, like many of his predecessors, is determined to change that. He plans to lay out an incremental plan where by 2019-20 roughly 25 per cent of energy revenues will be put into the Heritage Fund.

Hes promising a 10-year plan that will "secure Albertas future." The question will be whether the plan will prevent future governments from draining the fund.

'Critical changes' coming

Then there arethe cuts. Where? And when?

Albertans have been told to brace for "critical changes," and as Prentice cautioned in his speech, "holding the line on spending in a growing province is truly a cut."

He said on Tuesday that costs must be brought under control, not an easy task when 80,000 new Albertans are expected to arrive this year.

Questions remain about capital infrastructure projects, including schools and hospital.Prentice has declared that "unlike previous deficit-fighting efforts, we will continue to invest in needed infrastructure."

Critics and opposition parties are prepared to attack the government if the cuts are deep and affect teachers, nursesand public sector workers.

The premier has also focused much of his pre-budget rhetoric on public sector salaries, claiming wage increases from negotiated contracts will cost Alberta taxpayers $2.6 billion over three years.

Prentice has made it no secret that he thinks these increases are too rich for a province in a financial crisis and that workers will be asked to do their part.

By taking to the airwaves earlier this week, Prentice also tried to prepare the average Albertan for what the budget has in store.

"As your premier, I feel that I can only ask to speak to Alberta when there is something essential -- something important to say," he said during the first few seconds of his televised address to the province. "And today, in Alberta, we face that circumstance."

Prenticesaid that working on the budget has been one of the most challenging experiences of his life.

The Alberta budget will be unveiled just after 3 p.m. MT on Thursday.

• Listen toPaul McLoughlin, Edmonton AM'sEye on the Legislature here