Is that it Alberta Premier Ralph Klein declares his province will soon be debt-free and there is no policy debate, discussion, or comparisons with the other provinces or Ottawa Sure, the announcement was reported on suppertime news channels and in morning newspapers, but it is already yesterday's story-and it should not be.

Alberta's success at reigning in spending, running surpluses, and paying off debt deserves much more attention. Yet given the nature of our political culture, many taxpayers - and public policy makers - have chalked up Alberta's debt-free status as dumb luck thanks to fat oil revenues. This is unfortunate since it ignores three key ingredients often overlooked by lawmakers necessary for successful outcomes, namely the importance of sound public policy, the need to set measurable targets, and hard work. Alberta's success is not the result of Premier Klein clicking his heels and wishing the debt away. It is the product of his early policies.

Put aside for a moment that Alberta finds itself in the envious position of having the money to pay off the final $3.7-billion owed to creditors. This is really the end of the story. Think back instead to 1993 when the province's debt peaked at $22.7-billion, every individual owed $8,500, and Alberta was considered by many to be a financial basket case.

The government set about cutting spending. Between 1993 and 1996 program spending was reduced by nearly 22% and the annual deficit was wiped out in 1995. It was happy days in Alberta again, but at this point the province also faced a choice. It could take the easy path and live with its debt - and continue paying more than $1.7-billion in debt servicing fees - or take a tougher route.



The Alberta government went to work whittling down its accumulated debt. It passed a law requiring the debt be eliminated by 2025, and that a percentage of surpluses be dedicated to debt retirement. At the same time, it re-earned its reputation as having a sound business environment by implementing a flat tax, keeping red tape to a minimum and forbidding government meddling in the economy by ending handouts to business. Yes, strong energy prices helped the government eliminate its debt early, but the province deserves credit for backing its commitment to sound fiscal policy with a specific plan.

The other provinces should be doing better. Despite a long period of economic growth, debt levels have increased - as the accompanying chart demonstrates. Without policy changes this trend will continue. The first step to reversing it is to control spending and eliminate deficits. As Alberta demonstrated this is not easy, but it can be done and pays dividends.

The federal government, of course, was successful in eliminating the national deficit but has not made debt re-payment a priority. It was Ottawa that lucked into debt repayment through good fortune, as debt relief was more often an afterthought. Looking ahead Ottawa is anticipating surpluses to total $16.3-billion between 2003-05 yet will commit less than half to debt retirement. Most of this surplus money will be spent as annual debt interest cost $35-billion.

Ottawa should signal its commitment to pay its bills by limiting spending growth to no more than inflation and population growth, enacting a legislative debt retirement schedule, and, to be bold, include annual payments of 5% of total revenues. Even at that rate it will take more than 40 years before Canada is debt-free. But if the federal government ever hopes to achieve this goal it will need to first set its sights on a target.