Aug. 31, 2010 - Issue #776: The Gaslight Anthem
Issues
Missing the point
Opposition parties fail to hit on the problem with Alberta's finances
The summer months in Alberta tend to be an incredibly frustrating time for mainstream reporters assigned to the legislature beat. Virtually nothing happens in terms of policy and government decisions over the summer, and reporters and commentators alike find themselves forced to report on the largely meaningless power-plays and furniture rearrangements of the province's political parties to fill inches of type and minutes of broadcasts.
It is for this reason that the annual first quarter financial update from the government, usually released in late August, garners as much media attention as it does. This year, of course, was no different. The fiscal update was released last week, and has occupied a significant amount of print and broadcast space ever since.
The problem is that the update itself, at least this year, contains absolutely nothing that is newsworthy or even interesting. Projected revenues are up a little bit from what the government estimated in its budget six months ago, and projected expenses are up by approximately the same amount. The bottom line and general direction of the province's finances remain virtually the same. The projected deficit for the current fiscal year remains at about $4.7 billion.
Aside from the novelty of this government being able to stay on budget for three months, there really was nothing there for the media to sink their teeth into. So they did what they always do—they identified an angle and created a story where there was none.
The angle they identified was that the province is increasingly relying on revenue from liquor and gambling to compensate for low taxes and royalties. Although this is a valid and important story to tell, it is really one that should have been told five or even ten years ago. Given that reality, it is also one they should have done a much better job of telling than they actually have.
The numbers in the first quarter update make the case clearly. The government is projecting that this fiscal year it will bring in more money from gaming, lotteries and liquor than it will from natural gas royalties or from conventional oil royalties. But this story isn't new. As recently as the 2005-06 fiscal year, at the height of the boom, the province brought in twice as much from gaming and liquor as it did from tar sands royalties.
So why has the media just noticed this now, four years later? It's hard to say definitively, but it might have something to do with the fact that Danielle Smith and the Wild Rose Alliance have decided to make Alberta's growing deficit a key plank in their platform, and the media are very interested in anything Ms. Smith has to say.
In her response to the fiscal update, and initial speculation that the government might at some point in the future consider a sales tax, Danielle Smith criticized the government for spending too much money and blaming their problems on others (a bad US economy, and falling gas prices). The Liberals echoed the sentiment, as MLA Hugh MacDonald suggested to the media that Alberta had enough revenue and instead needed to deal with spending.
It's interesting to hear both a WAP leader and a Liberal MLA so closely mimicking the past strategy of former Conservative Premier Ralph Klein, who in 1993 made the statement "Alberta does not have a revenue problem. We have a spending problem." the central plank in his campaign.
Klein proceeded to get elected and drastically cut spending across the board on public services and infrastructure. That took care of the "spending problem." At the same time, he drastically cut royalties, slashed corporate taxes and instituted a flat tax, all of which greatly reduced the province's revenues. All of these policies are still in place, and it is those same policies which directly resulted in the government’s current over-reliance on gaming, lottery and liquor revenue.
But because the media missed this story ten years ago, none of them thought to ask Smith and MacDonald the following question: "If Alberta had "enough" revenue in 1993, and Klein proceeded to drastically slash revenue, and we've had huge population growth since, then how can we still have "enough" revenue today? Furthermore, no one in the media actually asked Smith or MacDonald where their parties would cut the close to $5 billion required if they are to balance the budget without increasing revenues. Would they close more hospital beds and schools? Would they privatize more public services? If so, which ones?
The bottom line is that if we were to return to the tax system that was in place in 1999, six years into Klein's reign, we would be generating at least an extra $5.5 billion in revenue this year. And if we were to return to the royalty regime that was in place when Klein got elected, we would generate billions more. That would be more than enough to cover the current deficit, put some money into savings, and even generate enough of a surplus to expand services like health, education, social services and disability services to the level Albertans have said they want.
The reality is that Alberta's services and infrastructure today are nowhere near the level or quality they should be, and the government continues to pass up the revenue which would help get them to that level. For the Wild Rose Alliance and the Liberals to pretend, therefore, that the solution is to cut spending further and continue to ignore the income side of the equation is naïve and dangerous. And for the media not to call them on it is irresponsible. Albertans deserve better on both fronts. V
Ricardo Acuna is the executive director of the Parkland Institute, a non-partisan public policy research institute housed at the University of Alberta.
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