Saturday, October 1, 2016

Show Me The Money

"Alberta doesn't have a spending problem, it has a revenue problem!" - Economist A

"Alberta doesn't have a revenue problem, it has a spending problem!" - Economist B

"Stop oversimplifying a complicated issue in order to sell your book. Alberta has both a revenue AND a spending problem." - Enlightened Savage

Nation, if there's a story older than the Epic of Gilgamesh, it's probably the never-ending debate about taxation in Alberta.

My fellow conservatives pine for the halcyon days of King Ralph, when taxes were basically non-existent, government spending was only on the absolute necessities, and the surplus went to paying down debt and then cutting everyone a big, fat cheque.

Those on the Left side of the spectrum, meanwhile, tell stories around the campfire of the boogeyman from Tuxedo Park who slashed government services, blew up hospitals, and let the energy companies steal our resources for nowhere NEAR their actual value.

I have neither the time nor the energy to either defend the legacy of Ralph Klein or defend myself against attacks from people - on the Left OR the Right - who disagree with my interpretation of same. The facts are this: Tax rates in Alberta during Klein's first term were higher than they are now. Klein's government radically changed the way public services were delivered. And the cash debt that Alberta had accumulated to that point was paid down.

Those are the facts, and as such can't be disputed.

However, I'm not here today looking to write about history. I want to have a conversation about the future.

The reality of the fiscal situation in Alberta today is far from rosy. The Contingency Fund is completely tapped out, and the Alberta Government is running a deficit in excess of ten billion dollars. With a "b". $7 Billion of that is program spending - not money spent on one-time capital projects meant to put Albertan tradespeople back to work, but things like keeping the lights on at Mount Royal University, or paying your nurse at the Grey Nuns.

On the revenue side, while income tax revenue has been fairly consistent, the "Golden Goose" that Alberta Governments have used for years to cover their spending habits has all but stopped laying eggs. Over the past 2 years alone, non-renewable resource revenue has dropped by almost 85% - from $8.948 Billion down to an estimated $1.364 Billion. Put in another context, this drop represents almost the entire budget for the Ministry of Education - every teacher, janitor, building, and textbook - gone, in 2 years.

So, what do we do? How do we raise more money? How do we spend less?

I'm a fiscal conservative myself. I believe that government should provide only the services that it must, that it shouldn't compete with private companies offering the same service, and that every dollar spent by government needs to be justifiable. So naturally, my first inclination is to look for areas where the government can spend less.

These are some really big numbers, when you consider that they're in Millions of dollars. The 2 big kids on the block are obviously Health and Education - combined, they account for well over half of every dollar that government spends. And luckily, as a blogger, I'm not under any obligation to come up with a concrete and specific plan about which line items in each budget need to be trimmed, and how, and by how much. The problem is, they people we actually elected to the Legislature, who sit on the Opposition side of the House, aren't making specific and concrete recommendations either.

"Find efficiencies" and "Bring back the Alberta Advantage!" isn't a plan. They're catchphrases at worst, and putting a band-aid on an arterial wound at best.

Okay, there's a lot to take in there on the Expense side of the ledger. Let's see how much we actually NEED to find, and then we'll be in a better place to make tough decisions. So let's look at our Revenue:

Oof. That hurts. If you take away the non-renewable revenue, and don't include the transfers from the Feds (taxes that Albertans pay to Ottawa that Ottawa then returns to us, because that's how Confederation works), our revenue is $32.7 Billion. Of course, Ottawa's not going to cut us off, and those ARE our dollars to start with (there's only one taxpayer, after all), so call our "taxes, fees and investment" revenue an even $40 Billion.

Now, IF you subscribe to the theory, as I do, that non-renewable resource revenue shouldn't be used to fund government operations but should instead go into the Heritage Savings Trust Fund to bequeath to future generations who won't be able to rely on that sector of the economy once they figure out how to run a car on saltwater, then we've got "spendable" income of $40 Billion, and expenses of $51.1 Billion.

If, however, you further believe that taxes are too high, or that sin taxes and other fees are too high... then you've got to knock even more off the revenue side. Let's say an anti-tax party gets into government and reduces the tax revenue of government by a net of 20% - they cut taxes, the economy picks up, more people are paying taxes, which earns some of that money back... a 20% reduction overall, though. Now you're talking about spendable revenues of $32 Billion. Which is $19 Billion below our current spending levels. That's the entire Ministry of Health. If you sold every hospital, laid off every doctor and nurse, and fully privatized the entire system, you'd be at "break even".

Obviously, for numerous reasons - not the least of which is the Canada Health Act - that's not going to happen. So you've got to find the money somewhere. Surely, there are things government is doing that don't need to be done by government - programs and services can be privatized, government staff and their cushy salaries taken off the books. What do we spend on public servants, anyhow?

There it is - $25 Billion. Half of the budget is spent on public sector compensation. So if we just lay off roughly 90% of the sheriffs, teachers, doctors, nurses, lifeguards, administrative assistants, professors, meat inspectors, and firefighters, we'll be able to "bring back the Alberta Advantage!", lower taxes, live within our means, and save oil & gas revenue for the future. We'll just have to get used to 3 day wait times in the ER, elementary school class sizes of 100 students, and sheriffs driving schools buses full of violent offenders to fully automated jails.

If that sounds ridiculous, it's because it's supposed to.

But in case you weren't aware: the contracts between the government and the public sector unions are coming due. And nobody really expects the NDP to bring a salary freeze or mass layoffs to the table, which means that with new agreements the cost is likely going to get higher, not lower.

Look, at the end of the day, we all have programs that we like, and programs we see no purpose for. Some people see no reason for government to be in the business of fighting forest fires, until they see a glow coming over the hill. There are inarguably some government expenses that are far too high, and likely some that could stand to come off the books altogether.

But the larger discussion to be had here, is what we actually think government should be doing. What is its role, and what do we leave to the private sector? Should we, as Alberta taxpayers, be helping Alberta businesses, or let the market determine who succeeds and who fails? Should we promote tourism? Should we provide student loans, or let the students fight for the available scholarships and bursaries? Should we pay for parks, or charge users to get in? Until we've had that discussion, as a society, we can't get this funding issue under control.

A party or politician that proposes to hold the line on expenses needs to explain how they propose to pay for it all, without saddling future generations with so much debt they'll never be able to recover.

A party or politician that proposes to lower taxes is going to need to explain what specific programs they are going to cut, and how many Albertans they're going to send to the unemployment line, to save the $10B or more they need to balance the books while also reducing revenue.

There's plenty of blame to go around for the current situation - but blame isn't going to fix our problem. You can blame Redford, or Prentice, or Stelmach, or Klein - hell, blame Brownlee for all I care - but after you're done blaming somebody for this mess, we have to have a serious discussion about the government services we use, and whether we can have all the nice things that we want without paying higher taxes (spoiler: we can't).

We have, as politically engaged Albertans, fiddled for far too long while our fiscal Rome burned around us. Some of our politicians have tried to warn us that this reckoning was coming - but it's here, now.

What are we going to do about it?

The government budget documents are here. Go there, read through them, and find building projects, programs and jobs to cut. Or find taxes to raise. You, humble reader, are no less qualified than anyone else to suggest ways we can get our house in order.

So, let's do this. Let's fix the problem.

Show me the money.

No comments: