Not everyone in Alberta is happy with the direction Doug Horner is taking debt in the once "debt-free" province. But for the sake of Alberta's growth – both past and future – the Finance Minister doesn't see how his province can afford not to expand its debt load.
In a meeting Wednesday with a group of Globe and Mail editors and reporters (including yours truly), Mr. Horner defended his plan to spend $19.2-billion on infrastructure projects over the next three years, on top of the $4.5-billion it spent in fiscal 2012-2014. To fund the bulk of the plan, the government is looking at borrowing more than $16-billion – a big deal for a province that until last year, hadn't raised debt in the capital markets for nearly a decade.
But while the opposition Wildrose Party abhors the Tories' new debt-accumulating ways and has vowed to reverse the tide, Mr. Horner insisted that his debt-for-infrastructure plan is sound financial management that, frankly, the province can't live without.
"We created a deficit in infrastructure," he said, by avoiding debt-financed capital spending during the debt-slashing years of the Ralph Klein Tories. "I would argue that that debt to Albertans is as real as any debt you're going to take in the capital markets. By not building the school 10 years ago, the cost of that school today is probably 50 to 75 per cent more than it would have been then."
The province's booming economy, and accompanying boom in population, has exacerbated this deficit. The addition of more than one million people to the province over the past decade has created an acute need for schools, hospitals and roads – as will the expected addition of another million over the next decade, drawn to the province's energy-driven economic expansion. But without infrastructure investment, he said, all bets are off for attracting newcomers to fill the province's substantial skills needs, and, by extension, for sustaining the province's economic health.
"If we don't invest today, those people won't come," he said. "If they don't come, what happens to your oil industry? It becomes an even higher-cost industry, because you have a labour shortage that is even harder on you than it is today."
"If we defer the capital plan [as Wildrose proposes], you will actually slow down the economy … is that what we want? I would argue we don't."
And to borrow to fund the plan at a time when lending rates are at 50-year lows, he said, "is good financial management."
Anything Mr. Horner says over the next few months is sure to garner extra attention both within Alberta and on the national stage, amid the political vacuum left by last month's resignation of Premier Alison Redford. Not only is Mr. Horner a senior voice in the government, but he could potentially become Alberta's next premier – he finished third in the leadership balloting in 2011, and told The Globe he is "seriously considering" another leadership run to fill Ms. Redford's vacated post.
The fear, of course is that by opening the door to borrowing, Alberta might increasingly lean on the debt crutch, and find itself on a slippery slope back into its debt-happy bad old days. Indeed, as the architect of the return to borrowing, this may be an impediment to Mr. Horner's leadership aspirations; the debt guy might not look like the most politically marketable choice for the next premier.
But Mr. Horner insists he has plenty of safeguards in place to keep the reins on the debt load. The province sets aside funds every year to pay off each bond issue, in full, when it matures. By law, it can't borrow to pay for operating deficits; it can only borrow to fund capital projects. It has a cap on its debt-servicing costs, which cannot exceed 3 per cent of operating revenue – a lower level than bond-rating agencies typically require to maintain a triple-A debt rating.
"We wanted to be quite prudent," he said.
Follow David Parkinson on Twitter at @ParkinsonGlobe.