FISCAL POLICY Overspending Alberta underestimates revenue
C.D. Howe says windfall-rich province is worst offender,
but all had overruns
The Globe and Mail
Tue
27 Feb 2007
Page: B6
Section: Report on Business: Canadian
Byline:
David Parkinson
Source:

DAVID PARKINSON If you've got it, spend it. That has been
the rule of thumb for Canada's federal and provincial governments over the past
decade -- and for none more so than Alberta.

A study from the C.D. Howe Institute found that Alberta has the worst record over
the past 10 years for inaccurately estimating its spending needs in its annual
budgets, consistently overshooting its spending targets by an average of more
than 7 per cent.

Alberta also has the worst record in the country for underestimating revenue
at budget time -- which is no coincidence, the Toronto- based economic think
tank said.

For the federal government as well as the provinces and territories, "actual
spending tends to be higher than expected at budget time in years when revenue
is higher than expected, and vice versa," wrote Reid Adrian, Yvan Guillemette and
William Robson,
the authors of the study. "Apparently, many governments find it convenient to
spend unforeseen revenues by voting unbudgeted spending during the fiscal year."

The study found that each of the governments, on average, overspent their
budgets over the past decade. But for some, the overspending was minimal --
Quebec and New Brunswick each had overruns of less than 1 per cent.

The governments that tended to overspend the most were the ones that had the
biggest unforeseen revenue windfalls -- and those, the study said, tended to be
provinces with heavy exposure to natural resources, such as Alberta.

Another big variable, federal transfers, was a major contributor to
unexpected revenue gains for territorial governments, which also fed
overspending. Nunavut and Yukon actually exceeded their spending targets by
bigger margins than Alberta, with average overruns of 9.2 and 7.9 per cent,
respectively.

In fact, the study found that despite its consistent and substantial
overspending, Alberta was not a particularly egregious spender relative to the
extra revenue it received. Rather, it found that Quebec, which led the country
with both the lowest average overspending and the most accurate budget
estimates, actually tended to spend one of the highest proportions of any excess
revenue, while Alberta was in the middle of the pack. Quebec just didn't have
much unexpected revenue.

Prince Edward Island and Nova Scotia were among the worst overspenders, while
New Brunswick, British Columbia and Ontario were high on the list of best
performers. The federal government also ranked high, with overspending averaging
just 1.3 per cent of budget, though federal budgets on average ranked only in
the middle of the pack in terms of overall accuracy.

The report's authors said the results from all jurisdictions highlight a
general lack of discipline in sticking to spending targets, and called on
legislators and voters to demand better performance.

"It is important for governments to respect their budget commitments," they
wrote.

Further, they criticized the practice of introducing new spending toward the
end of the fiscal year when governments find they have excess cash, bypassing
the level of scrutiny they would face at budget time.

"It is one thing for high levels of taxes or deficits to exist as a result of
commitments made and debated at budget time. It is quite another to get them
because of overruns or, worse, right at the end of the fiscal year," they said.

THE SPENDING STORY

Alberta has the worst record among the provinces for estimating spending over
the past 10 years, off by an average 7 per cent.

British Columbia 2.05%
Alberta 7.05
Saskatchewan 2.85
Manitoba 3.36
Ontario 2.18
Quebec 0.61
New Brunswick 0.98
Nova Scotia 4.99
PEI 3.94
Newfoundland 2.35
CANADA 1.28%

SOURCE: C.D.
HOWE INSTITUTE

© 2007 CTVglobemedia Publishing Inc. All Rights
Reserved.

Edition: METRO
Length: 597 words