GENERAL ARTICLES

ALBERTAS TAXPAYERS PAY THE PIPER

R. S. SOMERVILLE October 15 1932
GENERAL ARTICLES

ALBERTAS TAXPAYERS PAY THE PIPER

R. S. SOMERVILLE October 15 1932

ALBERTAS TAXPAYERS PAY THE PIPER

The Foothills Province is now contemplating the results of a prolonged spending orgy

R. S. SOMERVILLE

THE taxpayer of Alberta is now contemplating the results of a prolonged sending orgy, and the feeling is not pleasant. Four years of progressive business depression and continued declines in the prices of commodities of all kinds have brought him face to face with a serious situation.

His position is analogous to that of the roisterer who considers the events of a riotous evening in the cold, clear dawn of the following day. He has a pretty bill to pay in the way of taxation, and he is not in a good position to meet the situation. It may be true that the Alberta taxpayer is not quite so badly off as his brother taxpayer across the Rockies, but there is small comfort to be gleaned from relativity of that kind. He has not yet reached the distinction of having a May Commission or a Kidd Committee investigate the financial stability of his province, but he would welcome one if it meant any hope of remission of the burden of taxes he must pay for an indefinite period.

This painful situation was not developed in one year or under one government. It goes back to a quarter of a century ago, when Alberta was advanced to provincial status. In 1905 a grave original mistake was committed. Looking back from the present standpoint, it seems clear that the scantily populated territories of Alberta and Saskatchewan should have agreed to form one large province instead of deciding on separate status. This would have obviated the cost of originating and maintaining two governmental systems with all that is implied, such as two sets of legislative buildings and viceregal quarters, two civil services, two house memberships, and the duplication of all the other costly appurtenances of provincial government.

The decision to pursue separate destinies, opposed at the time by some of the leading men of the then territories, has cost the taxpayers of the two young provinces a vast amount of money annually, and will continue to do so. Two governing systems were bad enough, but there had to follow, as a matter of course, two sets of judiciaries, two universities, two provincial libraries, separate agricultural services, normal schools, police systems, and what not. The people of Alberta and Saskatchewan decided separate status was the necessary thing. It appealed to their amour propre, or whatever it is that drives men to unjustifiable ventures, and so today they are paying for it.

The early governments of Alberta were most ambitious, and in justice it may be said they merely interpreted the views of their electors. They decided that provincial railways should be built into the northern part of the

province, although population and trade up there never justified the undertaking. They embarked on ambitious irrigation projects in the dry south, where Nature intended the land to remain forever a ranching country. They built three normal schools where one would have done, and today there are far more teachers than schools. They launched vast trunk highway projects from Edmonton to the international border and from Medicine Hat to Banff, and as far as possible laid roads into every farm community. They constructed bridges by the hundreds, and purchased ferries by the score. They erected handsome courthouses in many centres, and strung government telephone wires into the remotest hamlets. They established a very costly university in Edmonton, and gave Calgary a magnificent technical institute as a sop to southern chagrin.

Day of Reckoning Disregarded

THE quarter of century has been a period of enthusiastic spending. It is only fair to say that much of it was necessary in a young and growing province. There had to be facilities for law enforcement, for transportation and for education. Roads, schools and bridges were a necessity, but it is painfully obvious now that expenditure was carried out on too ambitious lines. It always was, and is today, out of proportion to the ability of a small population to pay. Proof is found in the fact that the still sparsely populated Province of Alberta has built up a provincial debt of over $140,000.000. It is a sum that may well dismay the tax-

payers when they consider how little benefit they have derived from the vast expenditure.

However, they are not in a position to complain of the situation in which they find themselves. Governments spend according to the aggressiveness of popular clamor for expenditures. There have been incessant demands for governmental expenditure and service, with the result that Alberta is maintaining social services and legislative and paternal processes altogether out of proportion to its needs. It was always easy in the past to borrow money. Unable or unwilling to finance out of revenue, this and almost every other provincial government has gone regularly and blithely into the money markets for loans. For more than two decades the different governments of Alberta have gone on spending public money most freely. It was the easiest thing to do, and a day of reckoning was disregarded. Now the scene is changed. It is no longer easy to Ixirrow. The only recourse left is to increase taxation at a time when the taxpayer is most ill-fitted to meet the call.

Alberta, formerly part of the Northwest Territories, became a province in 1905. Seven years later, on November 18, 1912, the then Premier, Hon. A. L. Sifton, addressed a letter to Lloyd’s Bank, Limited, London, in connection with an Alberta issueof one million pounds of four per cent, ten-year debentures, the sale of which was then being negotiated. In that letter Mr. Sifton quoted facts and figures which present extremely painful comparisons with conditions of today. He stated that the funded debt of the province, including the issue under negotiation, was at that time only £2,911,000 or less than $15,000,000. The present provincial treasurer, in his budget statement last February, announced that the net funded debt of the province had reached $133,173,000. A statement issued by the provincial auditor on August 15 was to the effect that the net funded and unfunded debt, as of June 30, 1932, had advanced to $141,792,252. An increase of over $125.000.000 in the debt in a mere twenty years means expenditure along no timid lines.

But even that does not tell the whole story of Alberta's accumulated obligations. In addition to the public debt of $141,792.252, there are government guarantees outstanding to the tune of over $11,000,000, and it is agreed that much of this amount will never be repaid. These include irrigation advances to the amount of $6,431,500; drainage scheme loans, .$629,000; University of Alberta, $450,000; hail insurance board, $1.295,000; guarantees to co-operative marketing associations, $1,990,059; binder-twine advances, $348,608, and so on. The present Farmer Government has been generous in advancing money to agricultural pools of all kinds, many of w'hich have been experiencing very trying times and are not able to meet repayment conditions.

Mr. Sifton pointed out that in 1912 the estimated revenue of the province -excluding the telephone system - was $3,541,000, and the estimated expenditure $2.897.000. /n the budget presented last February, the estimates called, for an expenditure of $16,673,144. Actual expenditures for tie last fiscal year were over a million and a half dollars higher. That is a large sum of money to be collected from the taxpayers. For purposes of comparison, it may be said

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Alberta’s Taxpayers Pay the Piper

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that in 1912 the population of Alberta was j 425.OÜU. Provincial expenditure then was less than three millions. Today, with a population little over 700,000, provincial expenditure is scaled up to around eighteen millions. 'The population has not doubled in twenty years, but the public expenditure has increased six-fold. There, in a nutshell, is the explanation of the present difficult position of the Alberta taxpayer. He is heavily overtaxed because there are not enough of him to bear the burden.

Economy is Difficult

¡TN ORDER to meet the pressing demand j A for more revenue last session, the Alberta Government imposed a stiff income tax for I the first time. It collects five cents a gallon from gasoline sales. It absorbs all the revenue accruing from the sale of liquor, motor licenses, drivers’ permits, etc., and in addition collects special revenue from the cities in the form of a supplementary revenue tax, which in the case of Calgary amounts to alxmt $60.000 a year. Interest on the enormous public debt and other fixed charges inspire a selfish policy toward the cities. Over ten years ago a Farmer Government was elected to power on a platform of economy and class preference. The Farmer Ministers apparently have found it as difficult to economize as did their predecessors in office. They have done their full part in increasing the provincial debt, as the following table prepared by their own auditor will show. The period covers the ten years from 1921, when the Farmers assumed office, to last year.

Debt: Gross Bonded Debt $59,010.000 $116,802,000 Net Bonded Debt $57,463.000 $111,509.000 Gross Unfunded Délit ... $ 5,840,000 $ 14.031,000 Net Unfunded Debt ...... S 5.589,000|$ 7,036,000 Net Funded and Unfunded Debt $63,052,000 $118.545,000 Realizable or income21,588,(XX) j 39.604,(XX) producing assets Net General Debt $41.464.(XX) |$ 78.941.000 Contingent Liabilities .... S30.408.000¡S 11,072.000 Result of Operations: Revenue |$ 8.486,946,S 15.710.962 Expenditure : 10.605,156 18.017.543 Surplus or Deficit |$ 2,118.210$ 2.306.581 Revenue Gross Revenue !$ 8,486,946 $ 15,710,962 Less revenue from Dominion Government J 2,420,035 _ 2.970,480 Net Revenue from local $ 6.066,911 S 12,740,482 Expenditure: Debt Charges i$ 1,939,635 S 5,782,068 Controllable................... 1 8,665,521 12,235.475 ¡$10.605,156!$ 18,017,543 Estimated Population 588,454 640,700

Although the presence of the great depression was apparent to every private citizen at least two years ago. and private business had inaugurated radical and essential economies, there was no recognition of the necessity of public economy on the part of the Alberta Government until the budget was introduced in February last. A four-milliondollar deficit and general discontent over high taxes inspired the Government to announce certain economies in the public service. Rut they were insufficient, according to the views of the Liberal group in the Legislature, who proposed the following amendment to the Budget motion:

“Whereas on December 31. 1931, the public debt of the province amounted to $133.173.003; and whereas, in addition to the said public debt there were outstanding guarantees of $11,306.124, a considerable portion of which will have to be assumed by the province; and whereas there was a deficit for the year

ending March 31, 1931, of $2.450.751; and whereas this Assembly has been advised in the budget speech that the Government expects a deficit on March 31 next (1932) of about $4.000.000; and whereas the Government of Alberta has expressed its intention to impose new and additional taxes; and whereas the people of the province are unable to pay additional taxes; therefore, this Assembly is ol the opinion that the Government should reconsider the estimates and reduce the same, and effect greater economies in the cost of government before new taxation is considered.”

Anything in the nature of a want of confidence declaration is voted down when a Government commands an obedient majority, and this protest met the usual fate. But it is significant that the administration, alive to the strength of public protest, is steadily devoting attention now to plans of economy. It realizes that there must be drastic retrenchment in public expenditure in view of declining revenue in spite of the exploitation ol almost every conceivable source of taxation within its power. A direct and indirect debt approaching $150.000.000 for a province of slightly over 700,000 people, means fixed charges which alone constitute a heavy burden on all available taxpayers. The backward condition of agriculture and the great increase of unemployment in the cities are not favorable bases on which to increase the volume of taxation.

Plans For Retrenchment

XTOT long since. Premier Brownlee announced that plans are well advanced to reduce the topheavy municipal structure of the province. There are 166 municipal districts and 143 improvement districts in Alberta, and he proposes to amalgamate them into forty enlarged areas for administrative purposes. The proposed change is expected to effect a saving of $250.000 annually in municipal taxes, as well as curtailment of the exjxmditure of the Department of Municipal Affairs, and to provide a more efficient and less cumbersome system of administration. The plan will ensure more equitable assessment, equalize the tax burden, provide more uniform school levies, put road-building and maintenance on a more co-ordinated basis, and do away with an army of municipal officials. It is a step in the right direction, and should be accompanied by a similar scaling down in the provincial administration. It is amazing but true that there are sixty-three members in the Alberta Legislature, drawing $2,000 a year indemnity. Even much criticized British Columbia has only forty-eight. It is all a part of the gandióse plan on which Alberta was organized, and it offers an explanation of the financial trouble in which the province finds itself today.

Alberta will have to curtail its spending programmes and reduce its expansive ideas on social services and paternalistic ventures.

It is functioning far beyond its ability to support. A Kidd Committee would soon discover the root of the trouble. There has been no adequate public retrenchment to meet a rainy day. Wheat is no longer two dollars a bushel, and the growth of population is lagging far behind the increase in expenditure. Champagne cannot be purchased on a beer income. The scale of provincial “services” and expenditures was set when times were good, revenues buoyant and public sentiment in favor of spending. Now all this is changed. The time for spending money for political purposes is past. The Government must get down to the exercise of business principles in its expenditures, and the first of these is retrenchment in the face of deficit.