Demand Fairness from Ottawa and from Edmonton

A few weeks ago, Albertans voted to reduce inequities in the federal equalization program. The deficit between the dollars that leave to and come back from Ottawa has recently been as high as $27 billion in one year. During times of crisis, it feels like salt in open wounds that Quebec blocks Alberta’s ability to sell the oil which generates the equalization wealth Quebec receives.

The appetite among some equalization recipients is insatiable. Bloc Quebecois leader Yves-Francois Blanchet recently dreamed of siphoning even more federal funds to his province at Alberta’s expense by suggesting that equalization should also be washed through imaginary environmental standards.

It is therefore crucially important that Albertans redress existing inequities and prevent designs for future ones.  In doing so, they will protect the fruits of their own labour and their heritage to future generations.

However, threats to the current fruit and patrimony of Albertans do not exclusively come from outside.  Alberta’s profligate provincial politicians and bureaucrats keep failing as custodians of the province’s wealth. They drive the damage to Alberta’s fiscal health. 

Focusing solely on Laurentian inequity can be a dangerous distraction away from the pernicious domestic fiscal threat. Expressed differently, Albertans would not be further ahead by reducing federal equalization inequities without removing the home-grown liabilities.

The most visible example of domestic liabilities is the galloping growth in the cost of the Alberta provincial government machinery during the 15 years since 2005 (The choice excludes the extraordinary spending that COVID-19 policies unleashed).

In 2005, the operating expenses for the Government of Alberta totalled $24.2 billion while serving a population of 3.322 million Albertans. There was a $5.2 billion surplus that year.  In the first six of those 15 years, Alberta experienced warp-speed acceleration in government spending. It leaped from $24.2 billion to $38.44 billion by 2011. That represented an increase of nearly 60 percent although the population only grew by 9.7 percent.

Similarly, the 2019 operating expenses were $48.4 billion, serving a population of 4.371 million, and generated a deficit of $6.7 billion. In the 15 years before the pandemic, contrasted to 32 percent population growth, Alberta’s government spending increased 100 percent.

Let’s acknowledge that the money buys modestly good services, but all other things being equal, Edmonton spending habits have been madly disproportionate to population growth. Considering that governments typically present increased program spending to the public as improvement in services, Albertans would do well to ask whether their services have improved 100 percent since 2005.

Focusing on these several years of pre-COVID-19 Alberta public finances shows that government spending has consistently outstripped revenue. Since 2009, with the exceptions of 2012 and 2015, budget balances were steeped in red ink.  

Let us also acknowledge that one can partly attribute the see-saw of Alberta finances to the corresponding ups and downs in resource markets. But the record also shows that despite these ups and downs, government spending growth stampedes incessantly forward at disproportionate rates.

So “fixing” equalization will not be enough. Albertans need to think about what it would mean to keep more of their money in the province, instead of shipping it to Ottawa to give to Quebec, given Edmonton’s trend to grow itself indiscriminately. Unless the provincial government trend were stopped and reversed, Edmonton would spend the money just as quickly.

Some will say it’s preferable for Alberta civil servants and elected representatives to spend Alberta’s money in Alberta rather than their Ottawa counterparts wasting it elsewhere. Fair point. But if that is what Albertans want, let’s open the debate and decidedly determine that it is so.

Albertans should demand fairness from Edmonton as well as from Ottawa. It would serve Albertans best simultaneously to seek equalization reforms and to return their own house to fiscal order.  This means putting the brakes on the relentless growth of government spending that is radically out of sync with population growth. This also means transforming the Heritage Fund into a real sovereign fund.

Alberta’s fortunes may be about to return with high resource prices. In light of a possible new boom, it is doubly important that Albertans figure out ways to bring provincial government spending growth under control and that they set a plan to save more of their common wealth for the future.

Unless Albertans regain control of their own public spending, reforming equalization to keep a greater share of their own wealth at home will mean no more than serving it to Edmonton.

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