Newsrelease

February 12, 1998
Edmonton, Alberta

"Budget '98 is a balanced package for Albertans. It's a package Albertans can afford. It provides direct tax savings to every taxpayer and targets the greatest savings to those who need it most. It reinvests money in education, health and children's services - areas that are Albertans' top priorities. And it maintains our commitment to paying down the debt. That's exactly the kind of balanced approach Albertans are looking for."

Budget '98 strikes the right balance for Albertans

Provincial Treasurer Stockwell Day unveiled the details of Alberta's Budget '98, including three-year budget and business plans for each ministry of government.

Budget '98 sets out government's new Agenda for Opportunity and builds on the announcements made by Premier Ralph Klein in January of this year.

Overall, the focus is on four key areas:

• Putting children and young people first.
• Addressing pressures from a growing economy and population.
• Strengthening our economic and tax advantages.
• Staying the course on balanced budgets and debt repayment.

Highlights of government's fiscal plans for 1998-99 include:

• Tax rates for all Alberta taxpayers will go down by 1.5 percentage points, from 45.5 per cent of federal tax to 44 per cent. This tax cut will save Albertans $123 million in provincial personal income taxes and it provides another boost to Alberta's combined tax advantage. Information on a new Tax Review Committee is attached in a Backgrounder, also announced today.
• As planned, the maximum payment under the Alberta Family Employment Tax Credit will double to $1,000 a year for a family with two children earning between $19,000 - $25,000. And more families are eligible. The program helps working families with children and a net family income of less than $50,000. In total, 160,000 low and middle income families with 320,000 children will receive credits this year.
• The tax credit for a one-income family earning $30,000 with two children will rise from $300 to $800. Combined with the income tax cut, this family’s Alberta taxes are being reduced by nearly 50 per cent in 1998.
• Alberta continues to lead the country in economic growth and Budget '98 forecasts continuing strong growth of 4.6 per cent in 1998-99. With that strong growth, Albertans can expect to see 156,000 new jobs created over the next four years.
• Budget '98 projects a surplus of $165 million for 1998-99.
• In spite of a strong economy, Budget '98 forecasts the province's total revenues to drop by $1.5 billion in 1998-99 to $15.2 billion, a drop of over 11 per cent. That drop is primarily because of lower oil and natural gas prices and corresponding decreases in resource revenues for the province.
• Spending on programs will increase by three per cent in 1998-99 to a total of almost $13.9 billion. Total spending, including debt servicing costs, will increase to just under $15 billion.
• Consistent with the advice at the Growth Summit and the priorities of Albertans, spending plans are targeted to put people development first, especially children and young people. An additional $550 million will be invested by 2001 in basic and post-secondary education and Family and Social Services. Spending on Health will increase by about $500 million by 2001.
• In 1998-99, spending on Education will increase by 5.7 per cent to a total of $3.2 billion. Spending on Advanced Education and Career Development will increase by 3.1 per cent to a total of almost $1.2 billion. And spending on Health will increase by 4.8 per cent to a total of $4.2 billion.
• Alberta's net debt could be eliminated by March 31, 2000. We expect to make another payment on the net debt of about $2 billion at the end of the 1997-98 fiscal year. That would put Alberta's net debt at $1.5 billion, down from $8.3 billion in 1993-94.
• Once the net debt is eliminated, Alberta will still have $13.6 billion in accumulated debt. Albertans will be consulted in the coming months on plans to pay down the province's remaining debt.

"Budget '98 is a signal for Albertans. It's a signal that the only way taxes are going in Alberta is down," said Provincial Treasurer Stockwell Day. "It's a signal that we'll stick to a responsible fiscal course. Spend what we can afford. Spend it wisely on Albertans' priorities. Keep attacking the debt. And by the time we reach a new millennium, we'll once again own more than we owe. That's a budget package that makes Alberta the envy of every other province."

For more information, contact:

Hon. Stockwell Day
Provincial Treasurer
Alberta Treasury
(780) 427-8809

Trish Filevich
Director of Communications
Alberta Treasury
Telephone (780) 427-5364
e-mail: webmaster@treas.gov.ab.ca

Budget '98 Highlights

• Budget ’98 sets out an Agenda for Opportunity that builds on our successes and helps prepare our young people for the opportunities of tomorrow by:
  • putting children and young people first,
  • addressing pressures from a growing economy and population,
  • strengthening our economic and tax advantages, and
  • staying the course on balanced budgets and debt repayment.
• Agenda for Opportunity is based on five simple rules Albertans have told us to follow:
  • Remain fiscally responsible. Don’t ever run a deficit again and don’t raise taxes.
  • Be unwavering in your commitment to pay off the debt.
  • Keep looking for new, better and more efficient ways of doing things.
  • When we have the money, reinvest in Albertans’ priorities — education, health care and infrastructure.
  • Be accountable. Be honest. Listen to Albertans and let us know what you’re doing.
• Low taxes are a key component of the Alberta Advantage. Alberta has the lowest overall tax burden in Canada. Alberta is the only province without a provincial sales tax. Our tax advantage will be strengthened in 1998. The average Alberta family will pay nearly 34% less in provincial taxes and health care insurance premiums than families in other provinces.
  • The basic provincial income tax rate is being reduced by 1.5 percentage points to 44% of basic federal tax, effective January 1, 1998. The reduction will show up on July paycheques and will be doubled up for the last six months of the year.
  • As planned, the maximum payment under the Alberta Family Employment Tax Credit will double to $1,000 a year and more families will be eligible. The program helps working families with children and a net family income of less than $50,000. In total, 160,000 low and middle income families with about 320,000 children will receive credits this year.
  • The tax credit for a one income family earning $30,000 with two children will rise from $300 to $800. Combined with the income tax cut, this family’s Alberta taxes are being reduced by nearly 50% in 1998.
  • We will consult with Albertans on developing a new, simplified Alberta personal income tax system. Recommended changes in the tax system from the review will be brought forward in legislation in the spring of 1999.
• Alberta has had the fastest growing economy in Canada for the last five years. The economy is expected to grow by a further 4.6% in 1998. The private sector has created over 200,000 new jobs since December 1992. Our unemployment rate is the lowest since 1981. Our objective is another 156,000 new jobs over the next four years.
• We will maintain fiscal responsibility. All spending increases and tax reductions are affordable within our fiscal plan. We will continue to base our budget on the revenue that we can prudently expect each year, not the best that we can hope for.
• As required by law, the budget will be balanced every year. A surplus of $165 million is budgeted for 1998-99.
• Oil prices are forecast to average US$17.50 per barrel in 1998-99 and gas prices to average Cdn $1.70 per thousand cubic feet. The legally required revenue cushion and budgeted surplus will keep the budget balanced even if oil prices average only US$16.00 over the year and natural gas prices average only Cdn$1.55, assuming other revenues remain on target.
• If the revenue cushion is not needed, the 1998-99 net debt payment could be $585 million.
• Net debt could be eliminated by March 31, 2000. Over the next year, we will consult with Albertans on a plan to pay off the remaining accumulated debt of close to $14 billion on which we still pay interest of over $1 billion a year.
• As announced by Premier Klein in January, we will reinvest $1 billion in Albertans’ priorities over the next three years:
  • We will put children and young people first. Basic education spending will rise by an average of 3.8% per year over the next three years. We are targeting $550 million to enhance basic and post-secondary education and other people services and address growth pressures in these programs.
  • We will increase health spending by about $500 million to meet the changing needs of our growing and aging population. Health spending will rise by an average of 3.8% per year over the next three years.
  • We are targeting our spending at Albertans’ priorities. By 2000-01, 73% of all program spending will be directed to basic and advanced education, health and social services, up from 70% in 1997-98 and 62% in 1992-93.
  • We have responded to growth pressures on infrastructure with $260 million in one-time funding from surplus revenue in 1997-98. If the projected surplus in future years again exceeds $1 billion, the first $1 billion will be used to reduce debt. The next $250 million will be available to fund one-time initiatives.
  •  

Note: After viewing any table, press your "back" button to return to the document.

Click here for graphic - "Consolidated Fiscal Summary"

Click here for graphic - "Net Debt"

Click here for graphic - "Historical Consolidated Fiscal Summary"

Click here for graphic - "Revenue"

Click here for graphic - "Expense"

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Backgrounder

February 12, 1998
Edmonton, Alberta

The 1998 Tax Review Committee

The 1998 Tax Review Committee is being established to examine specific aspects of Alberta’s tax structure, and to make recommendations to the Provincial Treasurer based on its findings. The Committee will work closely with the Taxation and Financing Committee of the Alberta Economic Development Authority in evaluating options for the province’s personal and corporate income tax system, including, but not limited to, the role and mechanisms of government for knowledge-based industry financing.

Personal Income Tax

The Committee will consult with Albertans and prepare a report making recommendations and providing options to the Provincial Treasurer regarding the feasibility of moving to a more effective personal income tax system. The report will be prepared by September 1998.

The Committee will consider:

1. Whether Alberta should take advantage of greater flexibility available under Alberta/Federal tax collection arrangements to re-design the province’s personal income taxes while maintaining a single collection agency.
2. Various options/structures for Alberta’s personal income tax, taking into consideration:
   • the government’s commitment that taxes will not be increased in any transition
   • the impact on the economy and marginal tax rates
   • the impact on different demographic and income groups of Albertans
   • the degree of simplicity and transparency
   • tax competitiveness
   • policy implications and issues, such as family/individual taxation, high marginal rates, work/welfare trade-off.

Corporate Income Tax

The Committee will prepare a report making recommendations and providing options to the Provincial Treasurer regarding the government’s role in, and mechanisms for, financing "the knowledge-based industry" in Alberta (defined as research and development and motion picture film and video production). The report will be prepared by April 30th, 1998.

The Committee will specifically explore whether Alberta should:

• implement specific tax credits for the knowledge-based industry
• implement other mechanisms for promoting investment in the knowledge-based industry
• enhance the existing policy of low rates levied on a non-selective, broad base.

Members of the 1998 Tax Review Committee

Jack Donald, Chair of the 1993 Alberta Tax Reform Commission
Gary G. Campbell, QC, Chair, Taxation and Financing Committee, AEDA
Ric Forest, Vice-Chair of the 1993 Alberta Tax Reform Commission
Ron Hierath, MLA Cardston-Taber-Warner
Audrey Luft, Businesswoman

Jack Donald and Gary Campbell are designated as Co-Chairs with additional Committee members to be named as required.

The Committee will work closely with the Taxation and Financing Committee of AEDA. Members of that Committee are:

Gary Campbell, Chair
Larry Pollock, Vice-Chair
Ross Glen
Mike Greenwood
Margaret Mardirossian
Bernie Papp
Roger Smith

For more information, contact:

Hon. Stockwell Day
Provincial Treasurer
Alberta Treasury
(780) 427-8809

Trish Filevich
Director of Communications
Alberta Treasury
Telephone (780) 427-5364
e-mail: webmaster@treas.gov.ab.ca

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