Long term spending restraint needed in Alberta
When Saskatchewan’s former New Democratic Finance Minister Janice MacKinnon says you have a spending problem, you listen. After all, she was the minister that helped avoid the fiscal iceberg that nearly sunk our next-door neighbours in the 1990s.
“Relative to the rest of Canada . . . (Alberta) is a big-spending province in virtually every area,” MacKinnon said. “So that’s correctly what the focus should be on. Get that spending under control.”
MacKinnon will head-up a panel of financial experts charged with outlining a path to balancing the Alberta government’s budget without raising taxes.
After years of runaway spending, finding areas to cut shouldn’t be a tough task for the expert panel.
The United Conservative government is taking over after the New Democrats’ operating spending grew faster than inflation plus population growth every year between 2015 and 2017. This followed a decade-long Progressive Conservative spending spree which doubled the province’s program expenses.
Albertans could save billions of dollars if per person spending for health care and government salary levels were brought in line with the average of British Columbia, Ontario and Quebec, according to a University of Calgary report. Billions more should be saved by ending subsidies to rail car companies, the petrochemical sector, oil upgraders, renewable energy producers, tech and media production businesses.
The real challenge isn’t finding cuts today, but making sure governments don’t erode the province’s finances tomorrow.
In 1993 the Alberta Financial Review Commission reviewed the province’s finances and made many straight forward recommendations including eliminating overspending, balancing the books and running surpluses to pay down the debt. These recommendations helped keep the province’s sinking fiscal ship afloat and set a course for then-Premier Ralph Klein to hoist the iconic “paid in full” sign in the summer of 2004.
But even with another boom, we eventually threw it all away again. After paying down the debt, Alberta’s financial situation turned eerily similar to the Lougheed-Getty era which triggered the original 1993 review.
In 2009 Alberta’s law outlawing deficits was scrapped and Alberta has not had a truly balanced budget since. By the time the Progressive Conservatives were defeated in 2015, the Alberta government burned through more than $16 billion in savings in the now defunct Sustainability Fund. Albertans are now left paying for a “big-spending” government that has a multi-billion-dollar deficit and a $60-billion debt tab.
“Sadly, sometimes these lessons have to be relearned,” stated new Premier Jason Kenney.
Albertans have already learned the key lesson: we can’t let politicians spend as their hearts desire — real limits need to be put in place.
Fortunately, there are models around the world which have successfully limited politicians’ ability to erode government finances. The Alberta government can take notes from Switzerland, Norway, Alaska and many other U.S. states, which have saved better for a rainy day or have limits on excessive spending.
A variation of Colorado’s taxpayer bill of rights could be implemented where all increases in revenue beyond inflation plus population growth are used to pay down the debt, and once the debt is repaid, the money is returned to taxpayers or saved. This policy would limit overspending in the boom years, while providing savings for years with lower government revenue.
After years of ballooning government, finding cuts today isn’t the hard part. The real challenges and opportunities are for the government to lay a framework that will leave future generations protected from irresponsible politicians trying to win elections on their dimes.
This column was published in the Calgary Sun on May 10, 2019.