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Province has just two gears |
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Written by Lethbridge Herald
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Thursday, 02 July 2009 |
About two weeks ago, former Alberta premier Ralph Klein offered this advice to his successor, Ed Stelmach: Instead of running deficits, the provincial government should cut its spending by five to 10 per cent across the board.
From most other leaders not directly in the hot seat of power, such talk would be dismissed as rhetoric, but Klein speaks from experience. He carried the big axe in the mid-1990s, rolling back public workers’ salaries by five per cent and chopping program spending, whether for good or not.
Today, five years after Alberta celebrated its “debt-free” status, Klein’s great claim to fame, we see the debt wasn’t erased; it was shuffled off paper and into buildings and other infrastructure that wasn’t maintained or built when it was needed. Klein got the debt-free glory; Stelmach got to clean up the consequences.
Yet the post-Klein government seems destined for the many of the same mistakes, seemingly priming the public for cuts and wage rollbacks and deferred capital projects. And as a substitute for a plan, there are plans for plans.
It leaves Albertans with a government that seems to only have two gears — slash or spend — and it is constantly grinding between them. Even during the Klein years, the province shed public sector jobs through the early years, then piled them on as the surpluses mounted.
With enough money for everything, there was no one asking whether the spending was of value or necessary or even remotely worthwhile.
But those days are gone. The global downturn took a massive swipe out of the province’s rainy-day funds. Plummeting oil and gas prices knocked the wind out of Alberta’s revenue sails. And we found ourselves back in the red, and back talking again about the possibility of cuts and rollbacks. Some of the chatter seems intended to gird Albertans’ loins for tax hikes.
The annual report released this week shows that our financial situation could have been worse. The deficit of $852 million was $574 million less than forecast just months ago.
If not for the $3 billion on-paper losses in the Heritage Savings Trust Fund and other investments, the province actually spent $2.1 billion less than it brought in in revenue.
The loss in investments like the Heritage fund can be traced to the losses on the equity markets, a blow investors around the world have felt. Investors, though, know losses on the stock market are only real if they sell their stock at a loss. If they hold on to their investments and wait for the markets to rebound, there may be no loss at all.
The province, though, is required to show decreases in investments as true losses of revenue, even though no actual cash has been withdrawn from the coffers.
Along the way, the province says it found $400 million of cost savings in government operations. In an operation as massive as the provincial government, one suspects a good efficiency expert could do better than identifying about one per cent of savings from the nearly $36.7 billion being spent.
Instead of focusing on an audit of spending that looks for value, the province announced Thursday an expert panel charged with doing some big thinking about Alberta’s economic future. The panel will be chaired by David Emerson, the former Liberal-turned-Conservative federal cabinet minister. Others onboard include David Dodge, former governor of the Bank of Canada and not one, but two, professors from Oxford University.
The group is expected to meet every six months for three years to “think big” about Alberta’s economic strengths, 30-year trends in the economy, society and government and the province’s strategy for dealing with them. No word on what this exercise will cost taxpayers.
Their findings may well make a good basis for a plan. And we continue making plans for plans and leaving the tough scrutiny of expenses for another day.
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