Let’s start with a surprising fact: Alberta is Canada’s socialist paradise.
I compared per capita spending on government programs across Canada a few years back and found that Alberta was spending 40 percent more than Ontario and one-third more than British Columbia for the same basket of services. Nothing has really happened since to alter those statistics.
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And now a less surprising fact: Alberta is Canada’s low tax paradise.
Alberta has the lowest overall tax burden of any province. We have a glorious single-rate tax of ten percent above Canada’s most generous personal and spousal deductions. We have no sales tax. We have competitive corporate taxes.
Now let’s square the circle: Alberta has been selling the furniture to pay for a vacation.
This requires a bit more elaboration. Alberta has, as everyone knows, vast endowments of non-renewable resources – oil and gas – in the ground. These non-renewable resources are an asset that belongs to Albertans thanks to a big constitutional fight that is at the core of the Alberta identity.
When the energy industry takes this asset out of the ground, the Government of Alberta levies a royalty. In economic and accounting terms, what that means is that Alberta has converted a physical asset (oil and gas in the ground) into a financial asset (royalties). This asset belongs to all Albertans. Peter Lougheed understood this and proposed that Alberta take half of those royalties and set them aside in a fund. That lasted a few years and built up a fund that Albertans know and love: the Alberta Heritage Savings Trust Fund.
But that legacy quickly unravelled. Alberta started started spending royalties as they came in – essentially selling the furniture to pay for a vacation. That lasted from the early 1980s to the mid 1990s.
Ralph Klein and Jim Dinning restored the Lougheed legacy and brought Alberta back to its senses when they balanced the budget and started using surpluses to pay down debt (essentially shrinking a negative Heritage Fund). Once the debt was retired, Alberta built up new funds that totalled roughly twice the value of the original Alberta Heritage Savings Trust Fund. That takes us through the Klein era.
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Alberta’s last two premiers threw away the legacy. They not only started selling the furniture to pay for a vacation, they cashed in the RRSPs, the RESPs, and the TPSPs (a fund roughly twice the size of the Alberta Heritage Trust Fund – about $30 billion) to ramp up spending levels that were 40 percent per person higher than Ontario and one-third higher than BC.
Which takes us to Prentice. Last night he took two the airwaves with a promise to restore the Lougheed/Klein legacies.
First, he admitted for the first time since the 1993 election that, as Ralph used to say, Alberta has a spending problem, not a revenue problem. Prentice’s version was to tell Albertans that they spend much more than other provinces do on public services. He even put a number on it. He said we could no longer afford that. Cuts are coming.
He then invoked Lougheed and promised that, once we are through the current mess, he will devote half of all resource revenues to growing the Heritage Savings Trust Fund.
If he accomplishes what he set out last night, he will reinstate the legacies left by Alberta’s two greatest premiers – Lougheed and Klein.
Prentice used the right words. It was a heady demonstration of why the political right has reunited under his leadership.
And he’ll keep it united if the right action follows the right words.
