“Stop mortgaging our future” has been a catch-phrase for
several decades. Usually, it has been directed by conservative fiscal hawks at
the perceived excesses of the “tax and spend” liberal or social –democratic
welfare state of the 1960s and 1970s. Yet in recent years, the worst culprits,
in both the United States and Canada, have been on the right side of the
political spectrum. And the worst of all may be right next door in the
conservative paradise of Alberta.
Do you think I am kidding?
The much-touted “Alberta advantage” has consisted largely of using most
of its resource wealth to subsidize both lower taxation and higher spending on
services than found elsewhere in the country.
Since the first full year of the Alberta Heritage Trust Fund in 1977,
$216 billion in revenue accrued from non-renewable energy went into the Fund; but of
that amount less than 6% of it has actually been saved. The latest reported
total for the Fund is just $17.4 billion—little more in real terms than it was
when Peter Lougheed left office in 1985.
In 2011, the Calgary Chamber of Commerce calculated that if Alberta had continued to save 37 per
cent of resource revenue, as was the case under Peter Lougheed, the Fund would be worth $128 billion. A reasonable rate of return on that amount
of money annually could fully cover even the current "crisis" deficit
of $7 billion. The left-leaning Canadian
Centre for Policy Alternatives and the right-leaning Fraser Institute have both
published reports arguing that Alberta should be saving more of its
non-renewable resource revenues. So has
the Parkland Institute at the University of Alberta . But governments over the
past quarter-century have not listened.
Savings started to be reduced during the Getty government in
1987, after which resource revenue was
no longer added to the Heritage Fund. “King
Ralph” did everything with oil revenue
between 1992 and 2007 except use it to
build savings: eliminating public debt, giving voters pre-election “Klein bucks” when
revenues were high, and using the Fund to pay for special projects for economic diversification
(some of which took the form of loans to private companies that had to be
forgiven); the elimination of sales taxes, the lowest corporate taxes in the country and
the country’s only 10% flat income tax . The contrast with other jurisdictions
is striking: Alaska for example continued to deposit 25 percent of its royalties
from 1982-2011 and Norway contributed 100 percent. If Alberta had followed the
Alaskan formula, by 2011 the Heritage Fund would have had $42.4 billion instead
of $9.1 billion. By the Norway rules Alberta would have had $121.9 billion by
2011.
Now that the Alberta government is having to scramble because
of low oil prices, premier Jim Prentice needs to show that he is another Peter
Lougheed and not another Ralph Klein.
Future generations of Albertans are counting on it.
