Funding Cuts to Alberta’s PSE Sector: There Are Alternatives

It has recently been reported that the University of Alberta wants to “reopen two-year collective agreements” with faculty and staff “to help the university balance its budget…”

This appears to be in direct response to Alberta’s provincial government announcing in its March budget that there would be a “7% cut to operating grants to universities, colleges, and technical institutes.”

This strikes me as a curious turn of events, for several reasons.

-Alberta’s top income tax rate (i.e. the provincial share) is a mere 10%.  This is the lowest of any Canadian province or territory.  By contrast, Ontario’s is 13%, BC’s is 14.7% and Saskatchewan’s is 15%.

-Alberta’s corporate tax rate is also the lowest in Canada.  Indeed, along with Newfoundland and Labrador, New Brunswick, Ontario and BC, the provincial corporate tax rate in Alberta is just 10%.  By contrast, Saskatchewan’s is 12%.  Nova Scotia’s is 16%.

-There is no provincial sales tax in Alberta, making Alberta an anomaly among Canadian provinces.  By contrast, Saskatchewan has a 5% general sales tax rate (in addition to the federal sales tax rate of 5%), BC’s provincial rate is 7% and Ontario’s provincial rate is 8%.

-What’s more, as PEF blogger Jim Stanford makes clear in a recent talk, compared to workers in the rest of Canada, Alberta workers have not been earning their fare share of productivity increases.  Indeed, though wages are slightly higher in Alberta than in other provinces (in nominal dollars), productivity is vastly higher (and not fully reflected in worker wages).    In fact, Alberta’s real median wage growth between 2006 and 2011 has been the third-lowest among all Canadian provinces, despite the province experiencing rather robust economic growth.  And for the 10-year period ending in 2009, Alberta had the largest loss of “middle class income” (i.e. income share of the middle three quintiles of the population) of any Canadian province.

If Alberta’s provincial government is having trouble balancing its books, why doesn’t it increase taxes?

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Note: Figures for provincial sales tax rates are from 2010.