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Alberta Premier Jim Prentice, speaking at downtown Rotary Club luncheon Monday, March 2, 2015 announces the province will overhaul how it bargains with public-sector workers and review legislation that prevents civil servants from striking. TDean Bennett/The Canadian Press

Alberta's public-sector unions warn that they won't accept wage rollbacks, but Premier Jim Prentice said Monday he was looking to overhaul the system for bargaining to avoid expensive future settlements as the province faces years of deep budget deficits.

Mr. Prentice has promised a tough budget later this month to deal with Alberta's $7.5-billion deficit, and has repeatedly said that wages enjoyed by the province's public sector are unsustainable. The pronouncements have seemed to set Mr. Prentice and the province's civil servants on a collision course.

"We had the best of everything—the most generously funded public services in Canada, the lowest taxes and plenty of oil money to underwrite all our dreams," Mr. Prentice said Monday. "Frankly, Alberta has made a habit of living beyond its means."

According to Mr. Prentice, the high wages enjoyed by the province's workers has been raised by other premiers as a problem within Confederation. Alberta's union leaders say that the high wages are a reflection of a local labour market that simply pays more than anywhere else in Canada.

"I thought Mr. Prentice wanted to show a more enlightened approach to negotiations," said Heather Smith, president of the United Nurses of Alberta. "But he's trying to create unnecessary hardship for public-sector workers. He's doing a very fine job of undermining morale."

The premier says one reason for the province's high public-sector wages is a lack of co-ordination between government negotiators. He promises a new made-in-Alberta approach to labour relations that will be consistent, co-ordinated and centralized.

A deputy minister has been given four months to report back on how to redesign the system.

Labour is worried about the direction Mr. Prentice is taking. "We're talking about a dramatic centralization of responsibility for bargaining with public-sector workers and their unions. It'll be centralized in the hands of the Premier. That's what they do in B.C. and it hasn't been a very productive model," said Gil McGowan, president of the Alberta Federation of Labour.

In B.C., public-sector negotiations are co-ordinated through a council in the province's treasury board that sets the government's agenda. Despite the system, the province has seen protracted negotiations and numerous strikes over the past decade.

Mr. Prentice, however, says he is is looking to emulate the B.C. approach: "We need a much more disciplined and co-ordinated approach to public sector bargaining in the province. Clearly the provincial government needs to be at the centre of this."

Along with the review of the province's labour relationship, Mr. Prentice has also ordered his labour minister to start consultations on rewriting decades-old labour rules that prevent most public servants from striking.

A Supreme Court of Canada decision in late January declared the right to strike to be fundamental.

Mr. Prentice says an update of the labour rules, created by the province's first Progressive-Conservative premier four decades ago, need to stand up to legal challenge.

A new dispute-resolution mechanism would be based on essential-service laws in other provinces. Alberta would allow unionized staff to strike as long as essential services continue operating, Mr. Prentice said while speaking in downtown Edmonton.