July 23rd, 2019

Alberta’s blue-ribbon panel: the sound of one hand clapping


By Lethbridge Herald Opinon on May 15, 2019.

Trevor W. Harrison

UNIVERSITY OF LETHBRIDGE

The announcement by the newly elected UCP government of a “blue ribbon” panel to examine Alberta’s finances was totally expected. Likewise, the panel’s mandate to focus on expenditures and not revenues (or both) comes as no surprise. The panel’s chair, Janice MacKinnon, a former Saskatchewan NDP finance minister (1993-97), has said that, in tackling that province’s finances at the time, she “laid the facts before the people.” One may hope, if vainly, that such will be the case in Alberta.

The panel’s mandate has already tied one hand – the revenue hand – behind its back, leaving only the expenditure hand with which to deal with what Premier Kenney has said is Alberta’s “deep fiscal hole.” But the depth of this hole is unclear. An analysis of Alberta’s finances conducted by economist Mel MacMillan last fall suggests the province’s economic situation is not dire. While he points to some warning signs – notably that oilsands investment, upon which the provinces has too heavily relied, is declining – MacMillan contends that Alberta’s economy will continue to experience moderate but slower growth in future.

Contra the driving theme of the government’s panel, MacMillan contends that Alberta has “mostly a revenue problem.” MacMillan shows that, in real dollars, per capita program expenditures in Alberta were the roughly same in 2018-19 as in 2008-09 (about $12,000). In fact, program expenditures as a percentage of household income have not risen since 2000, and are low relative to other provinces. Despite MacKinnon’s claim that, “Relative to the rest of Canada, this [Alberta] is a big-spending province in virtually every area,” MacMillan shows that since 2000 Alberta’s per capita expenditures have essentially been equal to the average spending levels of the 10 provinces.

Figures from the Royal Bank of Canada bear out MacMillan’s analysis. RBC data show that for 2018-19 Alberta has the lowest net debt-to-GDP ratio in Canada, eight per cet versus British Columbia, the next highest, at 14.8 per cent. Alberta’s expenditures relative to the other provinces are not “eye-popping” as stated by MacKinnon in her first comments after the panel was announced. Measured as a percentage of GDP – which reflects spending relative to the size of the economy – the RBC data shows that Alberta’s expenditures are in fact the lowest in Canada, 16.1 per cent for 2018-19 versus Saskatchewan, the next highest, at 17.9 per cent.

Again, as MacMillan argues the evidence suggests that the major factor bedeviling Alberta’s fiscal situation is revenues. For 2018-19, Alberta collected 14.1 per cent relative to GDP compared to the next highest province, Saskatchewan, at 17.4 per cent – the biggest difference in the case of MacKinnon’s old stomping grounds being that province’s 11 per cent harmonized sales tax. In fact, Alberta collects roughly $11 billion less in taxes than Canada’s next highest taxing provinces, British Columbia and Saskatchewan.

As MacMillan shows, and as similarly argued by Ron Kneebone and other economists, Alberta’s fiscal difficulties reflect a continued over-reliance upon resource royalties to fund necessary programs, with the result that the economy’s boom and bust is mirrored by a pattern of boom and bust on public expenditures. It’s a problem that the NDP, like governments before it, failed to address.

This pattern is not accidental, however. It is the result of bad policy choices made by past Alberta governments to keep taxes low – thereby to maintain a chimerical “Alberta advantage” – while paying for public services with royalties from non-renewable resources.

A famous Zen koan asks, “What is the sound of one hand clapping?” The panel’s mandated approach of tackling Alberta’s fiscal picture with one hand tied behind its back provides in the case of Alberta an answer: It is the sound of severe – and unnecessary – cuts to education, health, social services and other programs.

Trevor W. Harrison is a political sociologist at the University of Lethbridge and director of Parkland Institute.

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9 Responses to “Alberta’s blue-ribbon panel: the sound of one hand clapping”

  1. zulu1 says:

    This is the usual argument brought forward by academics that we must always look to the revenue side of the equation as well as expenditures, however, Alberta , historically, has an excessive spending problem not a revenue shortfall . For example , from 2002 until 2012 95 % of revenue increases were spent on wage and salary increases to the Alberta public service sector, so now we see why the good professor has his bias.Alberta program spending has been consistently higher than most other provinces for decades now, so , in other words , we have a spending problem , not a revenue problem. This is why the current government is concentrating on expenditures, and rightly so.. A provincial sales tax would solve nothing , since governments love to spend , and would simply increase spending to match their new revenue sources. Incidently, the only reason Alberta has the lowest provincial debt to GDP was a direct result of previous governments eliminating the debt, not because of two hands clapping .

  2. Resolute says:

    Exactly Zulu. We have a tax-funded professor “objectively” arguing for higher taxes (some for professor wages) because Alberta is not as insanely in debt or overtaxing its populace as much as other jurisdictions. An analogy might be an obese person amongst the morbidly obese, who have consequently lost control of their lives, arguing he/she ought to eat more! What great advice. What could go wrong. Incredibly un-credible.

  3. Dennis Bremner says:

    So let me get this straight Prof Harrison, you are suggesting, because we are not in as much poop as other provinces, its a good thing to use them as the standard and spend more? I sure hope you don’t teach people in that job of yours?

  4. Southern Albertan says:

    Still, what surrounds this, in the big picture, goes back to the lacking revenue money trail because AB Conservatives did not follow Lougheed’s ‘Six Principles’ for resource development. The ‘Six Principles’ are: “Behave like an owner, Collect your fair share, Save for a rainy day, Add value, Go slow and Practice statecraft.”
    When it comes to possibly having had at least $100 billion in the Heritage Trust Fund by now, this mishandling of the revenue in the boom years is stark and with lasting, irreversible negative effects.
    Another mishandling of revenue, were the Klein years when infrastructure was ignored. We were left with $billions in infrastructure debt, of which we are still doing ‘catch up.’
    It is a nobrainer that both, revenue and spending, are important.
    We will see how the Kenney UCP do with lack of revenue from carbon and corporate tax cutbacks. It is expected that they will also continue to operate with a deficit, even with drastic cutbacks to health care, education and whichever else social services.

  5. biff says:

    zulu – you try to discredit a point, that is based on a fair study, with your opinion. you are entitled, but that does not seem robust to me. the issue of revenue is significant. the mind blower is that even when we were pumping out oil as never before in the early part of this century, govt’s biggest revenue maker was still from gambling. scary ever the more seeing as we are not a vacation/gambling mecca. so, it would seem the prior conservative govts were stuck on to addictions: oil and gambling.
    the writer’s allusion to lack of taxation is not welcome, however. the people of canada are well over taxed, from high income tax, to high municipal tax, to high consumer tax, to high liquor and tobacco tax, to high cannabis tax…tax on after tax income let us call it compounded taxation. govt waste and corruption are key areas. massive audits are necessary, as will be rectifying the concerns uncovered and the prosecution and recovery of stolen monies.
    zulu, your point that public service is raking it in is spot on. mind you, this is what keeps lethbridge rolling along – overly paid public service jobs, at each govt level. don’t get me wrong: i am all for livable wages, but not just for some.
    so.albertan – very well stated.

  6. Pecker says:

    So you all support cutting all of our services (which are not that great to begin with) so we can afford to give tax breaks to corporations that might create a few jobs? The jobs created come and go but the tax cuts stay and the service cuts stay so where’s the win? I would think you would want to at lest see if there is a way to increase revenues and avoid the cuts or at least some of them.Bend over dummies the ucp is just getting started.

    • Tris Pargeter says:

      Is that right “Pecker?” So you aren’t a fan of the UCP at all either.
      So wherefore the scathing reply to my letter criticizing them then?

  7. biff says:

    i agree with you, pecker. we need services if we are to have a decent society and quality of life. my issue, as stated, is the squander of our wealth. i am ok to have wealth fairly distributed.

  8. GHG says:

    Alberta spends more per capita on services than any other province. That is a spending problem, not a revenue problem and one worth exploring.