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Headshot of Jeffrey Simpson. (Brigitte Bouvier/Brigitte Bouvier/For The Globe and Mail)
Headshot of Jeffrey Simpson. (Brigitte Bouvier/Brigitte Bouvier/For The Globe and Mail)


Alberta’s ‘boom and bust’ plague must end Add to ...

How do you change a political culture? Is a crisis required for change, or will honest talk without a crisis suffice? How many times does a jurisdiction have to make the same mistake before people wake up?

These questions relate to Alberta today, just as they have in the past. Alberta is not the only place where an entrenched political culture produces enduring mistakes, but it’s the one in the headlines – again.

Alberta’s political culture is about low taxes and big spending. The province has the lowest taxes in Canada – the so-called Alberta Advantage – and it’s at or near the top in terms of per capita spending on government programs such as health care.

Filling the gap between the low taxes and munificent services are revenues from oil and natural gas. These revenues account on average for 30 per cent of Alberta’s budget. These revenues fluctuate with world prices, North American energy markets and other factors beyond the province’s control. Unsteady prices lie at the heart of the “boom and bust” plague of Alberta’s economy – and its budget.

Albertans ought to know in their bones about “boom and bust.” They’ve lived it before. But their governments don’t do anything about it, in large part because they’re creatures of a political culture in which citizens enjoy the fairyland of low taxes and large government.

When times were good and non-renewable resource revenues were buoyant, Alberta governments systematically refused to plow into the Heritage Fund. As a result, the fund contains a piddling amount relative to what it could have become. The province built a Sustainability Fund to cover downturns in revenues, but that’s shrivelling.

Once again, the prices for Alberta’s non-renewable resources are dropping. Natural gas prices are very low and will stay there courtesy of new supplies. A glut of North American oil (so much for the End of Oil folly) means Alberta’s bitumen oil has to be sold at a huge discount, costing the province billions of dollars.

What Alberta needs is a steadier source of revenue to fund its basic government services – namely, a provincial sales tax of the kind found everywhere else in Canada. With such a tax, Alberta’s revenues would be much more stable, and more money from non-renewable resources could be placed into the Heritage Fund.

Asked whether he thought a sales tax was necessary, a former Alberta finance minister laughed off the idea with a political reaction: “They’d hang me from a lamppost.” He was certainly correct, given the province’s political culture. Even today, with the same unheeded lesson about volatile revenues from non-renewable resources again plaguing the province, Premier Alison Redford says: “It is not good enough to take the easy way out and raise taxes.”

So how about other easy ways out? Like borrowing more money to fill deficit holes. Or fooling people by saying that finding “efficiencies” in government services can fill gaps of billions of dollars. Or make-believe stories of the kind the Premier is peddling – that more money can go into the Heritage Fund without higher taxes, yet with more investment in the two biggest items in the provincial budget: health care and education. This is the easy way out of problems: Avoid them.

Ms. Redford – who, in a conference call with supporters on Monday night, neither ruled in nor out a sales tax – has promised to hold the first Alberta Economic Summit next month. She should save the money and reread a major report commissioned by her predecessor, Ed Stelmach, into her province’s future. The Premier’s Council for Economic Strategy reflected the collected wisdom of a group of Albertans and people from the rest of Canada and the United States.

That 2011 report warned (as others had before) of precisely the situation in which Alberta now finds itself. Relying so heavily on oil and natural gas revenues to fund current expenditures is a “risk to the province’s future.” Albertans, the report said, must “face up to the reality that every public service comes at a cost and that current expenditures should be financed by current revenue.”

The report was dead on arrival because it challenged an unreceptive political culture. The report was correct: The culture needs to change. But how?

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