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Alberta's finances more complex than 'we have a spending problem'

This op-ed by Bob Ascah appeared in the Calgary Herald on October 5, 2019.

The recent opinion piece by Franco Terrazzano of the Canadian Taxpayers Federation’s (“Sales tax will cost taxpayers but won’t solve Alberta’s problems,” Herald, Sept. 28) is an important contribution to a debate I hope will emerge from both the MacKinnon report and the province’s much-anticipated budget on Oct. 24.

Terrazzano employs emotional statements, such as “runaway Alberta government spending,” and Alberta’s “spending addiction,” and compares Alberta’s spending to alcoholism, a problem he believes should be solved by taking the “bottle” away. But the analogy misses the key point about any addiction: the key is not to eliminate the substance (“spending by politicians”), but rather to alter the behaviour of the addict (politician or members of the public).

He also writes, “Government revenue doesn’t mean better budgeting as higher revenues have gone hand-inhand with higher spending.” MacKinnon likewise has acknowledged that as revenue entered into the provincial treasury, more money also exited. I agree.

The recent Parkland Institute report I co-wrote, Cutting through the Blue Ribbon: A Balanced Look at Alberta’s Finances, concurs that looking at spending is appropriate. However, as the MacKinnon report is limited to focus only on the spending side, we decided to look at both sides of the province’s fiscal situation, unhampered by any narrow mandate.

It is important to note that economics or the “policy sciences” are really not sciences. All social-science research, including that of economists, is necessarily selective in the use of data. Just as our report “selected” data, so too did MacKinnon’s co-panellists and researchers select their data, and Terrazzano in his subsequent op-ed.

For example, is comparing Alberta’s spending with British Columbia’s a fair comparison, as the CTF suggests? Are we really comparing apples and oranges? Why not compare Alberta with spending in Saskatchewan — MacKinnon’s former province? Aren’t the economies of Alberta and Saskatchewan more alike with oil and gas and agriculture as economic drivers than B.C.’S? If we did that comparison we find — according to an RBC Economics July 2019 study — that Alberta’s per-capita spending of $12,701 is close to Saskatchewan’s level of $12,113 (2018-19). This is just an example of competing interpretations for interested Albertans to baffle over.

Our report compared the debt situation in the Ralph Klein era of the early 1990s and today, and found that on most measures that rating agencies track, the Alberta treasury is in better shape today than in 1993. This, of course, does not mean that there is no problem.

We also attempted to define the problem in terms of imagining a future where the province’s finances were sustainable. This does not mean that Alberta’s treasury will never suffer the effects of collapsing oil prices, but rather it means a spending and revenue structure which properly balances the citizens’ desire for “value for money” with a “better budgeting system” that also meets their needs.

Our study differs from the MacKinnon report in another important respect. While the Mackinnon report provides some historical information going back to 1986, some of its data begins in 2015, presumably to showcase the previous government’s ineptitude at encouraging investment. But, in doing so, this selection of data points fails to showcase similar episodes from Alberta’s lengthy experience with boom and bust. By contrast, our report’s data included series begins in 1965, showing Alberta’s economic and public finance problems have a long and difficult history.

One final comment: Premier Jason Kenney campaigned on a platform to restore the province’s finances, for which he received a strong mandate (54.9 per cent). But, the UCP’S platform also included pledges to “maintain or increase health spending and maintain a universally accessible, publicly funded health-care system,” and to “maintain operating spending at current levels as part of a realistic plan to balance the budget by 2022/23 without compromising core services.” On Oct. 24, Albertans will get their first real indication about the UCP’S ability to deliver on those spending pledges.

Bob Ascah

Robert L. (Bob) Ascah holds degrees in Commerce and Public Administration (M.A) from Carleton University. He began his working career in 1976 in the Office of the Auditor General of Canada. He moved to Edmonton in 1979 and completed his doctorate in political science at the University of Alberta in 1984. He joined the Alberta public service in 1984 (Federal and Intergovernmental Affairs) and moved to Alberta Treasury in 1986. At Treasury he was responsible for financial sector policy, foreign borrowing, and liaison with credit rating agencies. In 1996, he joined Alberta Treasury Branches and was responsible for government relations, strategic planning, and economic research. In 2009, he retired from ATB. In August of 2009, he was appointed director of the Institute for Public Economics at the University of Alberta, where he served for four years. In 1999, Ascah's Ph.D. dissertation, Politics and Public Debt—The Dominion, the Banks and Alberta's Social Credit was published by the University of Alberta Press.

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