Jim Prentice can't let this crisis go to waste.
The Alberta Premier has argued that the province can no longer afford both low taxes and high-quality government services.
He's right, but the provincial budget that was unveiled Thursday provides only a partial and unsatisfying solution.
There was an overdue, if implicit, acknowledgment that Alberta's beloved 10-per-cent flat tax on income can no longer endure in an era of cheap oil. There was also an obligatory rendition of that old Alberta favourite – the pledge to build up the province's rainy day fund and get off the boom-bust cycle of oil prices.
But there was only limited grappling with the province's spending, other than a vague commitment to bring the cost of Alberta's public services "in line" with the national average over the next three to four years. If Mr. Prentice truly wants to shake Alberta's petroleum dependency, it's a problem he will have to be bolder in tackling.
Alberta's spending on all provincial government programs amounted to $11,920 per person in 2013-14, according to Royal Bank economists.
By comparison, Quebec's program spending was only $7,888 per capita, while Ontario's was $8,546.
To be fair, those numbers can be swayed by differences in how provinces do their accounting, so they're not strictly comparable. Still, the magnitude of the apparent gap is staggering, even if you acknowledge a bit of imprecision.
Alberta prides itself on its debt-free status, fiscal conservatism and market-oriented ways. But when a province is spending far more than other more efficient jurisdictions on delivering roughly similar services, it's time to curb the righteous rhetoric and get down to the more mundane matter of paring costs.
This is not a new story in Alberta. The province's deficit swelled after the oil price crash of 1986, but spending wasn't reined in until newly elected Premier Ralph Klein began to impose draconian cuts in 1993. The painful memory of those cuts – including hospital closures and mass layoffs of nurses – provides the best argument for why the province should not wait so long this time to address its budget issues.
The new budget outlines plans to trim about 2,000 workers, most in health care. But the government still estimates a record $5-billion deficit.
Barring a rebound in oil prices, there are only two ways to prevent many more budget shortfalls.
One is to raise taxes even more than in the measures outlined in the budget, perhaps by implementing a sales tax. However, that is a dangerous move for a province that prides itself on its low tax advantage over the rest of the country.
The other is to cut spending, which means cutting back on services and reining in public-sector salaries.
The province estimates about half its budget is spent on compensation for public-sector workers, including teachers, nurses and doctors. At the moment, there's a wide gap between Alberta pay scales and those in the rest of the country.
Last year, for instance, a typical teacher's salary maxed out at $95,196 in Alberta compared to the $83,584 ceiling in the neighbouring province of Saskatchewan, according to a comparison prepared by the British Columbia Teachers' Federation.
Public sector unions argue that their salaries reflect the high cost of living in Alberta. However, that argument made more sense when the province was booming.
It's also an argument that was more compelling when revenue from non-renewable resources was providing 21.5 per cent of the province's revenue, as it did in 2010-11. Now that energy royalties are expected to provide only about 6.6 per cent of provincial revenue, the need for restraint is glaring.
Unless there's a sudden rebound in the price of oil, Mr. Prentice faces a showdown with the province's public-sector unions. If Alberta wants to close its budget gap, it's a battle he can't afford to lose.