LAKELAND – The Alberta government continues to demand the federal government cancel the planned increases to the federal carbon tax, according to Alberta’s Minister of Municipal Affairs.
If the provincial government is planning to help offset the costs of the increased carbon tax to municipalities “is a question that we've been receiving from municipalities,” acknowledged Rebecca Schulz, Minister of Municipal Affairs, when asked about the topic during a March 14 rural media roundtable session.
“So, we've reached out to them to get a little bit more information on this as well.”
As a province, Alberta is calling on the federal government to cancel the planned increases to the federal carbon tax, which will more than triple by 2030, said Schulz. She acknowledged carbon tax will add unnecessary costs to families and municipalities already struggling with inflation.
Eliminating carbon tax along with temporarily pausing federal fuel taxes would help millions of Canadians cope with the inflation crisis, said Schulz, explaining that while the province cannot unilaterally eliminate the carbon tax, “We will continue to call the federal government to cancel their planned increases to the carbon tax.”
Schulz also highlighted several measures the provincial government has taken to address inflationary costs. For example, “getting rid of the fuel tax,” leading to Alberta’s gas and fuel prices being lower than the rest of the country. The measure will remain in place for the time being.
MSI for municipalities
In addition, Schulz says the increase in MSI operating funding will also help alleviate inflation pressures for Alberta municipalities.
The province recently doubled the Municipal Sustainability Initiative (MSI) operating budget from $30 million to $60 million annually, providing more “flexibility” for municipalities to address their operating costs. She acknowledged the operating budget remained constant for a decade, and “that’s why now we are increasing our support through Budget 2023.”
County of St. Paul Reeve Glen Ockerman stated in a previous Lakeland This Week article about the budget that increases to MSI operating funding will help the County continue to support local organizations and community groups with facility operations.
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MSI funding has been in place since 2007. The initiative will come to an end this year and will be replaced by the Local Government Fiscal Framework (LGFF) in 2024.
As for capital funding, there is a total of $2 billion in MSI/LGFF capital funding expected over the next three years. MSI capital funding helps municipalities maintain infrastructure, in contrast to MSI operating funding that supports municipalities with its daily operations.
The $2 billion capital funding over three years includes $485 million MSI capital funding this year, the LGFF $722 million in capital funding in 2024, and about $813 million in 2025.
While Budget 2023 reflects the province’s solid fiscal position mainly due to the strong performance of the oil and gas and other resource industries, it does not extend to municipalities despite their role in supporting economic development, stated Rural Municipalities of Alberta (RMA) President Paul McLauchlin in a March 2 analysis of Alberta Budget 2023-24 released by the RMA.
“The budget has left municipalities to continue to shoulder growing infrastructure costs by making no changes [to MSI capital] funding in the current year, or more importantly, [LGFF] funding beginning in 2024-2025. The decision to exclude increased municipal capital support through the LGFF will stall infrastructure investment, especially in rural communities,” stated McLauchlin.
According to the RMA’s initial analysis, the LFGG $722 million capital funding represents a 37 per cent “decrease from historical [MSI] funding levels” over the past 10 years, “despite the significant provincial surplus.”
A preliminary analysis document of the budget released on March 1 by the Alberta Municipalities (ABmunis) echoes the RMA’s analysis. ABmunis’ analysis indicates that a total of $11.84 billion in capital funding has been delivered in total since MSI’s inception in 2007.
Between 2010 and 2017, MSI capital funding averaged over $800 million and began to trend down beginning in 2018. It increased to over $800 million again in 2021 before decreasing to less than $600 million in 2022 and going down to $485 million this year.
“MSI Capital has trended downwards since 2015 despite Alberta’s continued rise in cost inflation, population and infrastructure needs,” according to the ABmunis analysis, referencing municipalities’ challenges with MSI. In addition, due to the lack of assurance that future funding capital “would be delivered by the province,” municipal leaders faced challenges in “preparing accurate long-term financial plans.”
“For these reasons, ABmunis looks forward to the introduction of the [LGFF] as it will offer municipalities greater predictability and an assurance that funding levels will follow Alberta’s economic growth instead of political priorities of the day,” according to ABmunis.
Local Government Fiscal Framework
During the roundtable discussion, Minister Schulz said there is still no date on the LGFF formula, explaining, “It is something that we’re working on with municipalities.”
“There were two specific things in this budget that addressed [LGFF] formula... first was changing the revenue index factor,” she said, explaining the revenue index was originally at 50 per cent.
“We’ve heard feedback from municipalities [and] they want to be full partners... to see municipal funding linked at 100 per cent of provincial revenues,” she said, and the increase was made.
ABmunis also welcomes the news in its analysis, stating that the removal of the 50 per cent cap on LGFF’s growth will result in infrastructure transfers better matching the “increase in population and economic growth that drive the need for community infrastructure.”
“It also means that when provincial revenues fall some years, the LGFF Capital funding pot will decline at the same rate, but to enhance predictability for municipalities, it will apply to municipalities three years later. We have accepted this as part of being partners with the province in the Alberta’s overall financial health.”