Ted Morton is a former PC finance and energy minister in Alberta, and is currently a senior fellow at both the University of Calgary School of Public Policy and the Manning Foundation for Building Democracy.
Government budgets are a hybrid of economics and politics. This week's Alberta budget is no exception.
The economics are pretty simple. With revenues of $41-billion and expenditures of $51-billion, we are looking at a deficit of $10-billion. With the Alberta twist on LOL – lower for longer oil prices – the government has cancelled its earlier promise of a balanced budget by 2020. Deficits of $10-, $10-, and $8-billion are now projected for the next three years. So is Premier Rachel Notley hitting the fiscal brakes? Hardly. Over four years, the NDP is borrowing $34-billion for infrastructure spending. By the 2019 election, Alberta's total new debt will be over $57-billion.
Will this mean political suicide in fiscally conservative Alberta? Not necessarily. Ms. Notley's bet is that most of the voting public will not understand or care where this money came from or how it will ever be paid back. They will see new schools, new hospitals and new roads and reward their local NDP MLAs. She is also protecting her political base – public-sector unions. No wage freezes for these loyal supporters, whose compensation constitutes more than half of the entire budget. Similarly, there are no cuts in social services, health and education sectors, which now consume $3 of every $4 of program spending. For good measure, the NDP has also promised new child benefits for lower-income families. In effect, the NDP has decided to use Alberta's triple-A rating, a legacy of PC fiscal responsibility, to borrow $50-billion over the next five years in an attempt to buy the next election.
So what are Alberta's fiscal conservatives to do? Job one is to stop dividing their votes between two right-of-centre parties. The next step is less obvious. Promising fiscal responsibility and belt-tightening are hardly automatic vote-getters, even in Alberta. Just ask Jim Prentice.
To win the next election, Alberta conservatives have to attack the NDP for what they are not doing – which is saying nothing about the $15-billion a year that the federal equalization program takes out of Alberta and sends East. Then connect these figures with the $3-billion-a-year carbon tax that Albertans will start paying next year to replace all of our 18 coal-fired electricity-generating plants with more expensive wind-power and natural gas by 2030.
This "decarbonization" of Alberta's economy may be necessary to win "social licence" for new export oil pipelines. But it's not fair to ask Albertans to pay for this, while taking out $15-billion a year in equalization.
A united conservative party should say to Albertans, vote for us and we will cancel the $3-billion carbon tax and shelve the fast-track coal-retirement plan until Ottawa agrees to leave that money here. The message would be simple: Mr. Trudeau, leave Albertans' money in Alberta, and we'll clean up our carbon emissions on our own dime.
If Alberta conservatives can settle their differences and unite to defeat the NDP in the 2019 election – a big if – they then will have to confront and fix a more systemic failure in past PC public finance.
The last six PC governments' failure to constitutionally protect the fiscal policies that created Alberta's triple-A credit rating has effectively handed the NDP government the political equivalent of a platinum credit card. To prevent this from reoccurring, a new conservative government – whatever its name – would have to "politician-proof" the Heritage Fund from future vote-hungry governments and put some meaningful fences around future tax increases and/or deficit spending. Failure to do this will simply be setting the fiscal table – again – for their political opponents in a future election.
This is not just an Alberta problem. No rational government will pursue a policy of long-term public good – balanced budgets – if the short-term effect is to increase the risk of electoral defeat in the next election.
If Alberta's small-c conservatives want to make fiscal responsibility a permanent feature of Alberta government budgets, they will need to constitutionally entrench a set of fiscal and budgetary rules that cannot be easily changed by simple majority votes in some future Alberta legislature. The good news is that there are practical models from other jurisdictions on how this can be done successfully – the balanced-budget laws (BBL) and tax-and-expenditure limitations (TEL) used in many U.S. state constitutions. Alberta could lead by example again, like we did in the nineties.