Provincial budget impacts municipalities

·3 min read

The United Conservative Party (UCP) government released their provincial budget on February 25th, and it’s looking different than what was projected this time last year. COVID-19 created the largest economic downturn since the Great Depression, and it seems that temporarily increased funding to municipalities could be part of a provincial strategy to reinvigorate the market in 2021. The province’s budget looks like it will effectively lean on municipalities to create jobs now, and yet significantly decrease funding to local governments over the following years.

Most municipalities function with a combination of funding from property tax, applicable federal and provincial grants, and levies when necessary. One grant that municipalities have been relying on since 2007 is called the Municipal Sustainability Initiativeli (MSI), which is received from the province to help support local infrastructure funding. This includes both capital funding, which goes towards the actual building of projects, and operational funds, which support day-to-day functions. Each year, with the announcement of the provincial budget, municipalities across Alberta find out just how much they are allotted in MSI funding for the year, and what is projected for future years. A community does not have to use all of their funds that year, but the amount is set aside for them to apply for as projects come up, and they can earmark funding for future projects or projects on the go.

In 2019 it was announced that the MSI would be phased out and replaced by the Local Government Fiscal Framework Act (LGGF) in the 2021 budget. According to the Alberta Urban Municipalities Association (AUMA), “municipalities are seeking long-term stable and predictable funding” which they hoped would be delivered by the LGFF. Some municipalities were disappointed to see the MSI extended and the LGFF decisions put off until the 2024-25 budget. According to AUMA’s preliminary findings regarding the budget, “While MSI will increase by $233 million this year, declines in the next two years mean that municipalities will lose out on approximately $414 million in funding over the next three years.”

In a recent news conference, NDP Municipal Affairs critic Joe Ceci warned that last Thursday’s budget would mean “less money, less stability, less predictable long-term funding by this UCP government.” He shared “the front-loading of the MSI is certainly something to help municipalities with jobs in their communities, but it won’t provide them the predictable money over the long term”. It is likely that communities will have to cut services or raise taxes to address the reduction.

The province has found other ways to support local government during these difficult times, including a recovery plan of $500 million in municipal stimulus funding, and maintaining a freeze on the education property tax. Education property tax is a provincial tax that municipal governments are mandated to collect on behalf of the provincial government, which had been expected to increase this year.

The town of Cardston, along with every other municipality, is now tasked with creating their budget and five year capital plan based on the funding numbers coming down from the province. It will be interesting to see if communities attempt to spread the funding over the next few years, or if 2021 will see municipal budgets stimulating the economy through large capital projects like the proposed recreation facility.

Elizabeth Thompson, Local Journalism Initiative Reporter, Temple City Star