Tag Archives: Norway

Alberta is always in Tough Economic Times

“They don’t know what to do with tough economic times. It was easy enough to govern when the money was flowing in, when things were going well. They took all the credit for it at that time. It’s much harder to govern, and the mark of a good government is how they handle it, when times get difficult.” – Ray Martin, Leader of the Official Opposition (June 13, 1986)

Jim Prentice Premier Alberta

Jim Prentice

Despite Alberta’s prosperity, Premier Jim Prentice is warning we could be heading into tough economic times. The decline in the world price of oil has spooked the 43-year governing Progressive Conservative establishment and the corporate elites in downtown Calgary.

The perilous “price trough” has led Mr. Prentice to warn of a potential $7 billion revenue shortfall if oil prices remain at lower than expected levels for the entire 2015/2016 fiscal year. According to a government spokesperson, some of the missing $7 billion could come from revenue streams such as land leases, but at this point the number is largely based in speculation and politically spin.

Mr. Prentice’s prophetic $7 billion shortfall becomes more startling when learning the Alberta Government is projected to collect only $7.5 billion in crude oil and bitumen royalty revenue in the 2014/2015 budget year. This projected revenue is based on the price of Western Canada Select (WCS) oil remaining at $77.18 per barrel. Although the yearly average price is $84.02 per barrel the current price of WCS  has dropped to $48.44 per barrel.

Ray Martin NDP MLA School Trustee Edmonton Alberta

Ray Martin

If the “tough economics times” message sounds vaguely familiar, that is because it is. In oil-rich Alberta, we hear a lot from our political leaders about tough economic times, even when times are prosperous. In most cases, our politicians are managing voters’ expectations and positioning themselves to take credit as ‘prudent fiscal managers’ when the world-wide price of oil inevitably increases.

Meeting the Challenge of Tough Times” was the name of the three-year economic plan launched by Premier Ed Stelmach’s PC government in 2009.

Bitumen Bubble Alberta

Bitumen Bubble

The sharp decline of natural gas royalty revenue and that year’s world-wide recession, which felt more like a mild economic pause in Alberta, even convinced the Tories to amend the Klein-era Fiscal Responsibility Act to allow the government to pass deficit budgets.

And in January 2013, Premier Alison Redford used a televised address to warn Albertans that a $8 billion shortfall in the provincial budget was being caused by an ominous “bitumen bubble.” Ms. Redford’s bubble was then used as justification to slash funding to colleges and universities by 7% in that year’s budget.

Alberta Finance Minister Ron Liepert

Ron Liepert

But the PCs have not always predicted “tough economic times.” In 2012, then-finance minister Ron Liepert told the Calgary Chamber of Commerce to expect $16 billion in projected resource revenues by 2015. A huge jump in revenue would certainly increase the likelihood of Mr. Prentice calling a provincial election in early 2015.

Alberta’s government has heavily depended on revenue from cyclically priced resource commodities for decades. After years of unrestrained growth, no one should be surprised that Alberta’s economy could slow down.

The question is how we respond to actual tough economic times in Alberta. Was NDP Official Opposition Leader Ray Martin correct in 1986 when he said that “they don’t know what to do with tough economic times”?

While some right-wing think tanks call for a return to brutal slash and burn fiscal policies, the implementation of real long-term financial planning would probably be a more mature solution.

Alberta Norway Oil Fund Money Savings

Comparing Alberta’s Heritage Fund and Norway’s Petroleum Savings Fund.

Norway, a country with 5.1 million people, invests oil revenues into the Government Pension Fund Global and contains more than $857 billion. The fund was established in 1990 to smooth out the disruptive effects of highly fluctuating oil prices. Oil-rich jurisdictions like Norway prove that economies can be both economically prosperous and environmentally green.

Alberta Premier Peter Lougheed

Peter Lougheed

Alberta, a province of 3.6 million people, launched the Alberta Heritage Savings Trust Fund in 1976. Under the leadership of Peter Lougheed, the Heritage Fund initially received 30% of government resource revenues and was worth $12.7 billion in 1986. The Heritage Fund is now worth only $17.4 billion.

Facing tough economic times in 1987, the PC government of Don Getty halted all transfers to the Heritage Fund. Zero deposits were made between 1987 and 2004.

This week, PC MLAs passed Bill 11: Savings Management Repeal Act, which repealed the Savings Management Act, which was enthusiastically passed by the same group of PC MLAs in March 2014. The earlier bill would have diverted resource revenue to the newly created Alberta Future Fund, Social Innovation Endowment account and Agriculture and Food Innovation Endowment. The bill passed this week eliminates those new funds.

Kevin Taft Liberal Party MLA Alberta

Kevin Taft

Despite talk of revenue diversification, it is questionable whether the governing PCs would seriously consider increasing resource royalties, reinstating a progressive taxation system or introducing a provincial sales tax.

While many politicians view tax increases as politically unpalatable, a slight tax increase would not destroy the our province’s economy. “If Alberta increased its tax rates by $11 billion our province would still have the lowest tax rate in Canada,” Kevin Taft wrote in his 2012 book, Follow the Money.

Dr. Taft’s book breaks down government spending patterns over the past 30 years and details how corporate profits have skyrocketed in Alberta at the same time the PC Government has struggled with deficit budgets.

As a province with decades worth of dependence on revenues from natural resource royalties, it should not be a shock that we need to be smarter about how we plan and finance our government spending. Maybe our only problem is not our over reliance on cyclical natural resources revenues, but that the Progressive Conservatives are just bad fiscal managers.


Primetime Politics this week…
On this week’s Alberta Primetime politics panel, I joined Rob Breakenridge, Roberto Noce and host Michael Higgins to discuss the Gay-Straight Alliance debate, Moe Amery‘s texting-while-driving-demerits bill, and Bill 2: Alberta Accountability Act.

 

Opposition hoping for a sequel to Air Redford… Air Prentice

Air-Alison-Redford-Jim-Prentice

Alberta’s Opposition Parties are giddy at the thought of a sequel to the Air Redford scandals… Air Prentice. Can they make it fly in the minds of Albertans?

The long-summer of 2014 has begun in Alberta politics. With little substantial policy ideas to dispute or debate, Alberta’s opposition parties have set their sights on Progressive Conservative leadership front-runner Jim Prentice (if this continues, Thomas Lukaszuk and Ric McIver are going to start feeling left out).

Deron Bilous MLA Edmonton Beverly Clareview NDP

Deron Bilous

Hoping to tie Mr. Prentice to frequent-flying former Premier Alison Redford and her controversial $45,000 flight to South Africa and flights to Palm Springs and Jasper, the NDP Opposition released detailed flight manifests outlining the former federal cabinet minister’s travel expenses during his time in Ottawa.

Describing Mr. Prentice as “a Bay Street lawyer and a millionaire,” Edmonton-Beverly-Clareview NDP MLA Deron Bilous said in a news release that the Tory leader-to-be “used them repeatedly as a cabinet minister, costing the federal government hundreds of thousands of dollars.”

The NDP claim the manifests show Mr. Prentice’s flights cost the federal government in excess of $400,000. NDP researchers must have been giddy when they discovered flights in 2009 that cost $29,169 (Mr. Prentice had the government plane fly from Ottawa to Calgary to drop him and his constituency director off in Washington DC, and then the plane flew back to Ottawa empty) and in 2010 that cost $41,522 (Mr. Prentice flew to Norway from Ottawa with his Communications Director and Chief of Staff).

Jim Prentice Alberta PC Party Premier Leader

Jim Prentice

Following the NDP’s lead, the Wildrose Party quickly released an info graphic highlighting Mr. Prentice’s recent quote that politicians should not be riding on government airplanes, but should fly commercial with everybody else. Putting aside the $400,000 sticker-shock, it is not clear that Mr. Prentice did not frequently travel on commercial airlines. Members of Parliament are allowed a certain number of expensed commercial flights each year to between Ottawa and the riding they are elected to represent.

The question is whether Albertans will see this as more confirmation of Tory excess (which Mr. Prentice has pledged to crack-down on, even though short-term Premier Dave Hancock refuses to acknowledge it exists) or as the price of doing government business in a geographically large country like Canada. I imagine it will be a mix of both.

Recent polling from ThinkHQ shows the Wildrose Party far in the lead among decided Alberta voters, even after Mr. Prentice entered the PC leadership race. The polls also show the NDP leading in support in Edmonton. While this is one single poll, it is a snapshot that will surely contribute to the growing narrative that the PC Party remains in trouble even after jettisoning Ms. Redford.

With the smell of opportunity in the air, Alberta’s opposition parties are expected to continue taking every opportunity to remind Albertans of the out-of-touch attitudes of the previous premier and hope it sticks to Mr. Prentice and the 45 PC MLAs who eagerly endorsed his candidacy.