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Editorials Alberta’s fiscal panel gives Jason Kenney the austerity roadmap he wanted

Jason Kenney first came to public attention in 1993. In one memorable encounter, he confronted Alberta Premier Ralph Klein at the provincial legislature. Mr. Kenney, then in his mid-20s, was an activist in Alberta for lower taxes and government spending cuts. Mr. Klein was hardly unreceptive. The then-premier took the shears to the province’s budget – cuts of about 20 per cent.

This fall, when Mr. Kenney tables his first budget as premier, he will impose austerity on Alberta. The precise degree of belt-tightening is yet to be determined, but in the spring election, he promised to take the budget from deep in the red to balance in four years, while also cutting taxes.

To bolster his position, Mr. Kenney established a panel in May to assess Alberta’s finances. However, the panel was not permitted to consider raising taxes – even though Alberta’s per-capita tax revenue is lower than any other province. The panel’s chair was Janice MacKinnon, the former New Democratic Party finance minister in Saskatchewan.

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Ms. MacKinnon delivered the answers Mr. Kenney wanted, and then some. The first line of Ms. MacKinnon’s report, released this week, describes a “critical financial situation” and the need for “decisive action” – echoing Mr. Kenney’s election platform that warned of a “fiscal cliff.”

To balance the budget, Ms. MacKinnon went even farther than the Premier. Mr. Kenney ran on a spending freeze, whereas Ms. MacKinnon proposed spending on services of $47.8-billion in 2022-23, some $600-million, or 1 per cent, less than 2018-19. Because the province’s population is growing, and inflation ticks steadily up, the seemingly modest trim would land with a stinging punch – an effective cut of roughly 15 per cent from current levels, in the style of Mr. Klein. As laid out by Ms. MacKinnon, cuts could come across the government, from fewer universities to corralling dollars spent on doctors and hospitals.

In Ms. MacKinnon, Mr. Kenney has a bad cop. He can wave the report to advertise an urgency and if he then slightly dials back to his United Conservative Party’s platform – it forecast 2022-23 spending of $48.9-billion – he can claim a middle ground.

The findings in Ms. MacKinnon’s report are based on comparing Alberta with Canada’s three largest provinces, Ontario, Quebec and British Columbia. If Alberta spent at the same per-capita rate as those three, its total expenses would be $10.4-billion lower and it would have a budget surplus. What Ms. MacKinnon fails to note is Ontario and B.C. are two of Canada’s lowest-spending provinces – and Ontario is consistently dead last. The picture is very different if Alberta’s spending is compared with its prairie neighbours, Saskatchewan and Manitoba. By our calculations, using 2017-18 program spending, Alberta could lower annual spending by about a third as much – around $3.3-billion – to spend at the average of the other two prairie provinces.

What about closing all or part of the gap with taxes? Ms. MacKinnon told a press conference that there is “not a shred of evidence” the province should raise taxes. But higher taxes, or lower spending, are both legitimate policy choices. The most telling chart in Ms. MacKinnon’s report is arguably one on revenue, looking at provincial taxes paid by middle-class families in Calgary, Vancouver, Toronto and Montreal. The Alberta treasury’s tax take is less than half that of its peers. It’s the one province with no sales tax.

If taxes in Alberta were the same as B.C., where the budget is balanced and the economy is on a roll, Alberta would book a surplus. But Mr. Kenney is interested in only one side of the province’s ledger.

There’s also a misplaced fixation on the province’s small debt. The panel was asked to advise on paying off the debt, though there’s no economic logic in doing that. Keeping the debt stable, and hence declining relative to the size of the economy, would be just fine.

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The province does have a spending problem, there is no doubt. Alberta for decades has splurged its oil windfalls, creating a fiscal freak show: low taxes and high spending. From 2000 through 2015, under a succession of Progressive Conservative premiers starting with Mr. Klein, program spending rose 7 per cent a year on average.

It was the NDP, Mr. Kenney’s favourite target, that reined in the increases to about 3 per cent annually.

Mr. Kenney is ready for more aggressive action. He has dedicated his life to principles of austerity. Now, after he has set the table, Mr. Kenney will deliver his spartan meal later this fall.

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