Whenever the subject of Alberta’s economic problems comes up, it’s usually the Liberal government in Ottawa getting much of the blame.
New pipelines, Premier Jason Kenney has said repeatedly to any audience willing to listen, would solve the province’s dilemma overnight, and Ottawa has not done enough on that front. Much less has been said about the degree to which past governments in the province bear much of the responsibility.
So the Premier deserves credit for appointing a panel to look at spending in Alberta – specifically public-sector spending, with all that entails. This week, that group, headed by Janice MacKinnon, a former provincial NDP finance minister in Saskatchewan in the 1990s, published its report.
Many of the recommendations came as no surprise. Ms. MacKinnon and University of Calgary economist Jack Mintz conducted a deep dive on spending in Alberta just a couple of years ago. Many of the findings in that report surfaced in this one, along with many of their prescriptions for turning the situation around.
But it should be noted that Ms. MacKinnon was not asked to review the province’s revenue picture. This would have been too contentious, as it would have touched on sensitive ideas such as implementing a sales tax, which Alberta does not have. Instead, the panel just focused on how the government could cut costs to save a sinking fiscal ship.
The fact is, Alberta has helped inflate public-sector salaries across the country for years. The cost per capita of public-sector spending in the province has outstripped that of other jurisdictions, sometimes by wide margins, for some time. Alberta’s lucrative pay rates have been used by public-sector unions elsewhere as yardsticks in bargaining, much to the consternation of the finance ministers of other provinces.
Even during down times, governments in Alberta refused to wrestle public-sector spending to the ground. So this is a problem that has been years in the making.
Many of the remedies the task force came up with are not particularly novel. For instance, the report recommended overhauling compensation for public servants, including doctors, nurses and teachers. At the very least, that would mean no wage increases for the foreseeable future, at least until their paycheques come more in line with those of their counterparts in provinces such as Ontario, B.C. and Quebec. Indeed, the panel estimated that if Alberta reduced its per capita public-sector spending to the average of those three provinces, it could save more than $10-billion annually.
The MacKinnon report also recommends lifting a tuition-fee freeze at the postsecondary level and looking at tying K-12 funding to outcomes, rather than just enrolment numbers. It suggests privatizing some health-care services, such as day procedures – advice that will undoubtedly catch Ottawa’s attention. The panel further recommends conducting a review of all government services with an eye to cutting costs.
None of it seems particularly outlandish – except perhaps the idea that the government should legislate changes to compensation rather than negotiate them with unions. Such forced change is a recipe for deep civil unrest, and it would be no surprise if angry protests broke out. That’s what happened when Bill Bennett’s Social Credit government in B.C. legislated restraint measures such as wage controls in the early 1980s, prompting tens of thousands of workers to take to the streets.
To be sure, the challenge Mr. Kenney has before him is not for the faint of heart. If he carries through on the majority of the panel’s recommendations, it would make the controversial cuts Ralph Klein introduced in Alberta in the 1990s look like child’s play.
Mr. Kenney does have one thing going for him: A vast swath of the Alberta public – people who don’t get a government paycheque and who have been battered by the collapse of oil prices – are likely on his side in this matter. Still, it will be messy and unappealing work; after all, successive governments ignored the situation for a reason.
Hammering Prime Minister Justin Trudeau about the carbon tax and the unfairness of equalization is easy. Any premier can do that. Going in and fixing a situation that has been ignored for years and has deteriorated even further as a result is a much more challenging assignment.
At some point, however, simply slashing and burning the public sector won’t be enough. Down the road, some government in Alberta is going to have to look at the province’s unsustainable revenue picture and grapple with the hard truth that a sales tax is necessary to provide a more reliable income stream.
But first things first. The public sector should brace for impact.
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Gary Mason