Making a budget is hard; following one is even harder. Try creating a budget when you have to guess your income for the year. That’s the position the provincial government is in when it forecasts the price of oil and the US dollar.
In mid-April, the NDP unveiled their 2016-17 budget of $51 billion in spending with a $10 billion deficit. Here are some lessons from that budget.
Cutting expenses will never fix a revenue problem.
Government expenditures didn’t suddenly skyrocket. Oil revenues dropped by 85 per cent from $8.9 billion to $1.4 billion. That’s an income problem. Either Albertans need to change their expectations of the government’s function and purpose or they need to be willing to support the government in finding new revenue in the form of increased taxes.
If your family income goes down, you need to proportionally cut discretionary spending, but you can’t cut basics like housing and food. Perhaps you can reduce them, but they will always be a significant and necessary expense. You will always need a certain income just to cover living expenses.
Trim the fat; every little bit helps.
The NDP budget freezes salaries for government agencies, boards, cabinet ministers, political staff, and senior public servants. Twenty-six agencies, boards and commissions are being dissolved to save $33 million over three years. Supply budgets have been decreased by two per cent.
For some families, reducing costs means less eating out, fewer or no vacations, and no new large purchases. Families whose incomes already do not allow for such luxuries might need to cut cable television, phone, car use, or even the grocery budget.
Sometimes you have to spend money to save money.
The province is putting more money into affordable housing. Research shows people who have stable affordable housing cost the system less in other areas. Midwifery funding has increased. Every course of care provided by a midwife instead of a doctor saves the health-care system money.
Many energy efficiency upgrades can produce good payback for families. Investing $300 in a new low-flush toilet will save substantially on your water bill. Spending a little now on dental care can save you a lot of money in the future (and give you better health).
Debt isn’t always bad.
The NDP budget includes $34.8 billion in infrastructure projects over the next five years. This is for needed things like schools, hospitals, bridges and roads. Not only will the projects create jobs, they will also cost less to do now because of low interest rates and construction and labour costs.
A house mortgage is a huge debt but can be cheaper than renting and builds equity. Getting a line of credit for home repairs is better than letting your house deteriorate. Student loans are usually necessary for post-secondary education. These can all be good reasons to go into debt.
Don’t live off credit.
The government is borrowing money for day-to-day operating costs for the first time since 1994. It’s one thing to go into debt for investments like capital projects, but to do it for daily operating costs is not good and should be a short-term emergency measure only. The problem is it easily becomes a habit.
The basic common sense wisdom is “Don’t buy stuff you cannot afford.” But even that has been twisted so it needs to be clarified with “Make sure you have the money, then buy it.” If you don’t have the money to cover your basic living expenses, then get creative and make hard choices. Do not make a habit of using credit.
Decisions should be based on guiding principles.
The provincial government provides health care, education, social services, roads, law enforcement, a judicial system, recreation, and so on for Albertans. This need or expectation of our government hasn’t changed. So why would or should they cut these services?
If your family is under budget constraints, do you just give the boot to members who are costing more than they are bringing into the family financially? A family provides food and shelter and takes care of its members. Having insufficient income to do so doesn’t change that function.
As Premier Rachel Notley said, “There are some difficult decisions that need to be made.” That’s true for government, Albertans, families and individuals alike.
Feature Image: Budgeting can mean making difficult decisions. Credit: Pixabay