Of all the issues that made Alberta Progressive Conservatives wary of Alison Redford, her taste for the finer things in life may have been the least. More concerning for many in the party was her appetite for debt.
Red ink is not something generally associated with the richest province in the country. When Canadians think of Alberta, they imagine a treasury overflowing with money, a government without an unpaid bill in sight. But that province doesn’t exist at the moment.
Despite record revenues, the province is building up debt at a bewildering rate. According to numbers released in the latest budget, the accumulated capital debt will exceed $21-billion by 2016-17 – and that could well be higher. That’s almost as much debt as when Ralph Klein took over from a beleaguered Don Getty in 1992, an obligation Mr. Klein proudly eradicated with a lot of tough love.
Now debt is front and centre again. Wildrose Leader Danielle Smith says it will be a central issue in the next election. “By then, we’ll be paying $820-million annually worth of interest payments and that is not a situation Albertans are accustomed to thinking about,” Ms. Smith told me in her office. “We’re accustomed to thinking debt-free Alberta.”
Now that Ms. Redford is gone, it’s up to her Finance Minister to defend the province’s fiscal path. Like Ms. Redford, Doug Horner believes the government’s decision to borrow money to build roads and schools and hospitals is the right course of action when the cost of borrowing remains so cheap.
“It makes sense when the government’s earnings on investments top 11 per cent and the average rate of a long-term loan is 3.7 per cent,” Mr. Horner said in an interview.
Moreover, he says, the government hasn’t much choice when there are 100,000 new residents pouring into the province each year, many of them workers helping to fuel the province’s ever-white-hot economy. “If you don’t build that infrastructure to accommodate all those people, they’ll stop coming, and if you can’t attract people, well, that’s the second-biggest risk to our economy – not being able to get folks for the jobs we’re creating.”
There is certainly an argument to be made for that. Still, it’s easy to see Wildrose making hay out of all this debt come the next election. Ms. Smith says her party would immediately put the brakes on all that borrowing and get back to a “true annual surplus” within 36 months of taking office. But it would take 10 to 15 years for Wildrose to retire all the accumulated debt that the PCs racked up in office, she estimates.
Ms. Smith says her party would also table a budget that includes a single consolidated financial number, easy for everyone to understand. Mr. Horner has received widespread criticism for introducing a new system of accounting that many have said is designed to obscure the amount of debt the province was taking on.
The three-pronged approach divides the books into operational spending, capital spending and savings. Before being turfed from the job, Ms. Redford crowed about introducing a $1.1-billion consolidated surplus even as her government was borrowing more than $5-billion for capital projects.
Former provincial PC cabinet minister Ted Morton recently criticized the new accounting approach in a column for the Calgary Herald. Mr. Morton suggested this attempt to confuse what was really happening with the province’s ledger sheet was part of Ms. Redford’s undoing. While the broader public might not have taken much notice, Mr. Morton suggested, the changes did not escape the attention of PC party members, who can still recall the pain the province endured under Mr. Klein as he cut and slashed billions.
The subject of debt is expected to be front and centre in Alberta politics between now and the next provincial election. Mr. Horner is being pressured to run for the PC leadership. If he does and wins, he will own the debt issue like never before. He says he has no trouble defending it. And that’s just fine with Ms. Smith.
“With the windfall revenues we’re seeing now, there’s no excuse for it,” she says. “We’re saddling future generations with debt they don’t deserve.”
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