Even though Alberta has been buffered from much of the recession, our Provincial Government has been exposed for what it is: bankrupt of ideas and out of cash.
Before we rush to judgment, it is worth noting that we are both not alone and not as bad as many other similar North American governments facing real economic challenges. California is bankrupt – in debt at $26 billion and handing out IOU’s to cover for cash it doesn’t have. Several other US States are struggling. The 2009 debt for the year that ended in June for all states was $111 billion and is projected to rise to $180 billion by 2011. To cover challenging finances, Pennsylvania is looking at a 16% tax hike. Arizona, Illinois, Ohio and North Carolina are also in deep trouble. The US Federal Government has such a substantial deficit and debt that many are beginning to worry about whether it will be possible to fund the debt through bonds and other measures. Times are tough.
But Alberta has oil and gas and has had good times. We used to have a strong Heritage Savings fund for a “rainy day”, now denuded due to low rates of return and a failure to continue to put funds into this account when they were available. The Government built up a $6 billion infrastructure fund to cover the costs of growth. But we still face challenging times. According to various sources, we are looking at a $2 billion deficit in health care spending and an additional $2 - $3 billion across all other areas of government.
There are two responses to this situation. The first is try to pretend that we can continue to have the kind of government services we always have had and that we can fund these activities through debt until the good times return. The second is to decide once and for all that it is time to rethink the place of government in society and our daily life. The current Alberta governments response is very much in the first camp, as was evident when the Minister of health suggested that a $1 billion budget cut would have no impact at all on services and other Ministers are busily suggesting that tax increases will not occur in the near future.
The second response – reinventing government is what is needed. There are five things that the Government now needs to focus on to make this happen.
The first is to lay out the next twenty five to fifty years of expenditure on a no change basis, pegging oil prices at current prices and gas drilling at current prices and show Albertans what would happen. For example, if revenues remain roughly on a par with the current projections but health care continues to increase at 13% annually, at what stage does Alberta become unable to pay for health care?
Second, we need to rethink how we manage and fund health, schools (K-12) and care for the elderly. These three items are large expenditures, with the care for the elderly a growing issue for all developed societies. No one is ever happy talking about changes to these three services, but change is inevitable. It is time to engage in a serious discussion about user pay for these services – health care premiums, a higher level of educational taxes and a means tested provision for elder care.
Third, we need to determine if we need all of the other services that government provides. Less is more in the new economy of community. For example, do we really need government to pay for carbon capture and storage – a $2 billion investment in an unproven technology?
Fourth, for those services which we determine we do need, how best do we manage these and pay for them? What level of taxation is required to cover the cost of service? For example, do we really need to fund post secondary education at the level of government support now available? Could tuition be raised, programs reduced, management consolidated? Do we really need so many institutions – why not adopt a Federal University model and reduce the administrative costs? Unpopular, maybe, but necessary absolutely.
Finally, how are we intending to reduce our current dependency on oil and gas revenues to pay for services? Our current health care costs, for example, exceed the income the government receives from personal and corporate taxes. If it were not for oil and gas, we would be in deep economic trouble. But at some point, we will not have these revenues to pay for our government, So what are we doing to diversify the economy, create new sources of revenue and new opportunities for Alberta to thrive and grow?
It is time to take a cold, hard, honest and evidence based look at the future and make some choices, based on a vision for Alberta and an understanding that government will be increasingly smaller and less intrusive than it is now. It will be tough, but necessary. It will take courage, leadership and imagination. It will take foresight and the involvement of the people of Alberta in decisions about their future. Is there anyone who can make this happen? I don’t think so.