Like an unhappy spouse in a marriage, Alberta is doing a lot of soul-searching these days about its relationship with the rest of Canada.
And increasingly, it’s a case of show me the money.
United Conservative Party Leader Jason Kenney, who polls suggest is favoured to become Alberta’s next premier, insists he wants a “new deal, a fair deal for Alberta in Canada.”
Mr. Kenney’s demands include overhauling the country’s system of equalization payments, taking a larger bite of federal taxes collected in the province and cutting Albertans’ Canada Pension Plan contributions.
The UCP platform cites research by University of Calgary economist Robert Mansell showing that Albertans have paid $611-billion more in federal taxes since 1961 than they have received in transfers and services.
Well, guess what Alberta? You’re not alone. Based on the same analysis, Ontario and British Columbia have also been taken for a ride by the rest of Canada, to the tune of $722-billion and $110-billion, respectively.
That’s how federations work. Saskatchewan no doubt doesn’t get its share of the fisheries budget, but it gets an outsized share of farm programs.
What many Albertans really want, of course, is the unfettered right to build pipelines and get the province’s oil and gas to global markets.
Mr. Kenney and others are using chequebook federalism as a political cudgel. In essence, they’re saying that the marriage isn’t working financially any more.
But it is a dangerous game that is fomenting resentment, and fuelling talk of separation. Half of Albertans now say secession from Canada is a real possibility, and 60 per cent would support a Western separatist movement, according to a February Angus Reid poll.
A significant part of Alberta’s fiscal grievance stems from the Canada Pension Plan. A recent Fraser Institute report concludes the province would be better off if it pulled out of the plan, as Quebec did in the early 1960s. The study finds that Albertans contributed nearly $28-billion more into the CPP than its retirees took out between 2008 and 2017. Their conclusion: The province could cut pension contribution rates nearly in half by going it alone, sticking other Canadian workers with higher rates.
That Albertans have been paying more than they get out of the CPP is hardly a revelation. Compared to the rest of the country, Alberta has a lower ratio of retirees to workers. And Albertans earn more, on average.
The rest is arithmetic. The CPP is still largely a pay-as-you-go plan, where contributions from current workers cover the pensions of older Canadians.
“You have to look at the underlying implicit CPP contract: You pay money in wherever you work in Canada, and receive money out wherever you live after work, including outside Canada,” explains pension expert Keith Ambachtsheer, senior fellow at Ryerson University’s National Institute of Aging. “There is nothing mysterious or underhanded about any of this.”
With three years notice, any province can pull out of the CPP as long as it demonstrates that it has a replacement plan in place.
Whether Alberta should quit the CPP is less obvious. Looking at fiscal imbalances is a worthy debate to have, but national programs such as the CPP offer other unseen benefits, according to University of British Columbia economist Kevin Milligan. One of the reasons so many Canadians have been willing to move to Alberta to work in recent years is because they know their pensions are portable, no matter where they eventually retire, Prof. Milligan says.
“It’s one fiscal country,” he points out. “Labour mobility has been an important thing for the Alberta economy over the past 15 years.”
Another intangible benefit is that the Canada Pension Plan Investment Board, which manages the CPP, is shielded from political meddling because it’s answerable to both federal and provincial governments. It’s also a buffer against shifting economic fortunes across the country.
“In terms of governance, it’s not a bad model,” Prof. Milligan argues.
Most Albertans don’t need to be reminded about the sad history of the Alberta Heritage Savings Trust Fund, which was supposed to save resource royalties for future generations. Instead, successive provincial governments looted it to avoid raising taxes.
At the end of the day, University of Ottawa adjunct professor Michael Wolfson, a former assistant chief statistician at Statistics Canada, says the broader question implicit in all these fiscal calculations is: “Does Alberta want to be part of Canada?”
And the answer to that is just not about the money. Or maybe it is.