ST. PAUL - The provincial budget announced in late February is causing some concerns for area municipalities, as they continue to grapple with increased expenses, but stagnant funding.
According to Town of St. Paul Mayor Maureen Miller, "Municipalities have been working with a zero per cent or 'flat line' for years, yet our expenses have increased, and in order for us to even try to get to service delivery levels pre-pandemic will be impossible."
Provincial and federal responsibilities could weigh heavy on some municipalities.
"We also have looming over us the retroactive expense of federal RCMP contract, which could cost the municipality upwards of 800,000," says Miller, adding, "We still have not received direction on how the federal government expects municipalities to pay this expense."
Overall, the 2022 provincial budget is proving to be "a difficult budget to swallow." Miller reaffirmed many of the same statements during the Feb. 28 regular council meeting.
At the County of St. Paul, while administration is happy to see funding for many services continued, levels have mostly remained the same, or decreased.
"Upon the initial review of the provincial budget, there is not a lot of increased funding for municipalities," says County of St. Paul CAO Sheila Kitz. "We are happy to see that the Municipal Sustainability Initiative (MSI) has been extended to 2024, but this is at a reduced funding as in 2021, the funding was front ended to allow municipalities to do projects that would help spur the economy and get people back to work."
This means the next two years of funding will be at a lower level.
"The province has also continued to fund libraries at the same rate, as well as the grant for Agriculture Service Boards. We also anticipate to receive the same funding through what was previously the Federal Gas Tax – now called the Canada Community Building Fund," says Kitz.
When asked about the challenges the County foresees, Kitz notes that the 1.5 per cent increase for school tax requisition is one.
"While we are happy to see increased funding for education, it presents a challenge for municipalities as the increased requisition will result in increased taxes for our residents without increased municipal service," she explains.
She also notes policing costs as an added challenge. "Rural municipalities are also still adjusting to paying for policing costs which have been increasing each year – for the County we are seeing policing costs in 2022 of $333,500 and will increase to $500,000 in 2023. These are also costs outside of the County’s control and we have no control over the service that is provided for this added expense for taxpayers."
The County of St. Paul has been increasing the Municipal tax rate to cover the increased cost. The provincial government will not allow municipalities to set an individual tax rate so that the taxpayers can see how much the service is costing them directly, says Kitz.
Further, another challenge lays in assessment of Designated Industrial Properties.
"During the beginning of the pandemic, the province saw how COVID-19 affected the price of oil. With commodity prices at -$15, the province announced that oil and gas companies would have a three-year tax holiday for new wells and pipelines," explains Kitz.
This "tax holiday" will start with the 2022 tax year.
"This will certainly have an impact for rural municipalities to have any assessment growth. It seems to have had the intended result to increase drilling and activity in the oil and gas sector. That along with the increase in commodity prices has certainly turned the fortunes for oil and gas companies, the province, but not municipalities," says Kitz.
A temporary change while the province reviews the entire assessment process could see further depreciation of oil and gas assets, further reducing the assessed value of properties, which once again affects assessment growth for rural municipalities.
"For the County of St. Paul, this increase in depreciation has a negative impact on assessment of these properties. We have already received our assessment on linear properties and are just getting an idea of where the machinery and equipment properties are at. Overall, we have seen a reduction in these assessments that will have negative revenue consequences," says the CAO.
One more challenge the County is worried about has to do with how the municipality's population is calculated.
In November, the Government of Alberta announced that it will be changing the way it determines population numbers for municipalities.
"These population numbers are used for the calculation of many grant formulas when determining how grants are allocated. Previously, municipalities were able to conduct their own census which would be done based on processes approved by the Province," explains Kitz.
In the past, the County has conducted its own census following the last two federal census audits.
"Following the 2016 Federal Census, the County’s census numbers were 300 persons more than the federal numbers. We have received the 2021 federal census numbers, which are lower than the census the County conducted in 2017," she notes.
Council will now have to decide if it wants to spend about $30,000 to complete a census, which the provincial government will no longer recognize, "but if we have significantly different numbers, we would have to appeal the federal census numbers. There are a lot of unknowns as to what the reduced census numbers will mean for future grant funding."
Education
When it comes to education, the provincial budget has addressed some concerns, but "it is difficult to know the exact impact until we receive our specific funding profiles at the end of March," says St. Paul Education board chair Heather Starosielski.
She says the school division is happy to see some added support in transportation, with an expected increase of 4.6 per cent.
"Unfortunately this sector is being hit very hard with inflation around insurance, fuel, parts, repairs and replacement buses," says Starosielski.
The new K-6 curriculum has been a hot topic since it was announced, and the provincial budget does show some funding support for the implementation of the new curriculum, which is set to be put in place this fall.
"Boards across the province continue to be concerned over this implementation and it needs to be fully supported by the province."
Over the past two years, the education system has been "very stretched," especially with supporting students throughout the pandemic. While there appears to be some financial support in supporting the mental health of young Albertans in schools, it is still too early to know how much extra support there will be.
Like many other areas, "inflation is hitting hard," and it is proving hard to predict whether or not provincial grants will be able to keep pace with escalating cost.
"The budget as it is announced allows for the status quo, and hopefully once we have received our funding profiles we will have more clarity on exact funding," says Starosielski.
Background and healthcare
Alberta is expecting to balance its books for the second time in 10 years due to higher-than-expected resource prices, according to its official 2022 budget, released on Feb. 24.
In late February, the province revealed its plans to balance the budget by fiscal year-end in March of 2023, for the first time since 2015. The province is also forecasting a $511-million surplus for the year.
A sustained rebound in oil prices has been driving the province's recovery, and oil prices spiked to $100 per barrel on budget day, although the province predicts that for the next year the price will sit at $73 per barrel.
“In 2022, Alberta’s economy will fully recover from the contraction that first started in 2013 and we will lead the nation in economic growth,” Alberta's Minister of Finance Travis Toews said on Feb. 24.
The budget also shows $22 billion slated for operating expenses in health care. This is an increase of $515 million from the 2021 budget forecast, and does not include costs related to COVID-19.
Implications of the pandemic on the health-care system are still to be determined, and health-care costs for the pandemic in the 2022 budget will be funded with COVID contingency cash.
“To ensure health has the resources required to deal with this uncertainty, Budget 2022 sets aside $750 million in a COVID contingency. This contingency provides flexible funding to address the surgical backlog and ensures the province can cover other evolving and uncertain pandemic costs,” said Toews.'
*With files from Jennifer Henderson and Jessica Nelson
