During the 1990s, Ralph Klein scaled back spending by 20 per cent to balance the province’s budget. As a result, he paid off the province’s debt, reduced taxes and put Alberta in a position to create one of the strongest economies in North America.
The “Alberta Advantage” he helped create contributed to a flood of talented workers, entrepreneurs and investment dollars.
It’s time for Alberta to repeat what Klein’s administration did right and learn from his administration’s mistakes. Fortunately, the first step, balancing the province’s budget, is not as difficult as some claim.
Premier Notley likes to leave Albertans with the impression that balancing the provincial budget by 2021 would leave government services in tatters and require “firing nurses and teachers.” Fortunately, analysis by the Canadian Taxpayers Federation shows that’s just not true.
First, note this big-picture calculation – merely reducing Alberta’s per-capita spending levels down to the same level as British Columbia’s government spends per person would put our province in a surplus position. Clearly, the Alberta government is not so skilled at cost-effective service delivery.
Our budget modelling shows that $700 million could be saved by reducing the size of the Alberta government’s ballooning workforce. Government documents confirm that every two years 12 per cent of the civil service will be eligible to retire. Thus, over a two-year period, the government could downsize by 10 per cent largely without requiring any layoffs. Best of all, we’ve exempted health care and education from a reduction in staff due to demographic shifts.
Next, reducing government employee compensation by 10 per cent could yield savings upwards of $2.6 billion. Given the layoffs and large pay reductions we have seen in the private sector, this too is a reasonable measure – especially when one considers the mountain of evidence that shows government employees earn significantly more than their counterparts in other provinces.
Note that even with a 10 per cent reduction in pay, Alberta teachers would still earn more than teachers in Vancouver – a city with one of the highest costs of living in Canada.
Eliminating handouts to businesses, spreading the province’s capital plan over a few more years and a five per cent reduction in non-salary spending could help the government save $4 billion and, combined with one per cent spending growth in future years, lead to a balanced budget by 2021.
Best of all, our budget modelling eliminates the carbon tax immediately, maintains the small business tax reduction and very cautiously assumes provincial revenues will come in $2 billion lower per year than the province has budgeted.
Once the budget is balanced, capping future spending for inflation and population growth would not only put the government in a surplus position and allow for debt repayment each year, the government could bring back our 10 per cent general business tax rate and 10 per cent personal income tax rate.
No tattered services, no fired nurses or teachers – we just need leadership that’s willing to impose a healthy dose of restraint for a couple years. If we see such leadership, Alberta will be in a great position to lead Canada once again.
Colin Craig is the interim Alberta director for the Canadian Taxpayers Federation.