Alberta Must Fix its Own Fiscal House Now & Not Pass the Problems on to Future Generations.

Alberta's Fiscal Challenges!
I am confused by the fiscal messaging coming out of Alberta these days. Albertans are into some tough times and more to come from what we are being told. With chronic low natural gas prices and other adjustment in our budget assumptions we can’t expect to rely on resource revenues to sustain our program spending.

There are some other realities that have put us in an operating accounts deficit position. However, let’s be clear Alberta has billions stashed away in various accounts – other than the Heritage Fund. We are borrowing the short fall instead of using the cash reserves. I think that is a good idea given the extremely low interests rate these days.

We are told we have almost a $1B of deficit from last year, then $4.7B in this year and now ballooning to $6.2 B. We can expect an even larger deficit next year even after we cut $2B of spending and Health Minister Liepert is reported to say he doesn’t think you can make that kind of cut in the system in one year in a recession. Recently we have been told by Minister Liepert that our leaner more efficient new health care system will tack on another $1B of deficit this fiscal. That is ironically the same amount as health care premiums used to generate before we scraped them.

What Can Be Done?

Go To Ottawa for More Money!
Part of the deficit “solution” being considered by the Alberta government is to go to Ottawa for more money to help out cash strapped Alberta, particularly for health care. Ottawa has rightly told Alberta we must be a “have-not province” before that would happen. Alberta is far from being a “have-not” province so we will have to find our own solutions to the health care budget shortfall.

Since Harper is now known to be low-balling his own budget deficit estimates according to the Parliamentary Budget Office who predict a structural deficit will prevail until at least 2014 the likelihood of Canada bailing out Alberta are between slim and nil.

Lots of Room to Raise Taxes & Still be Competative!
Alberta’s taxes are also extremely low compared to the rest of the country. Perhaps our taxes are too low especially if we can’t sustain our quality of living and public services as a result. Minister Evans noted in a Calgary Herald Opinion Piece in May 2009 that “…if Alberta had the same tax system as other provinces, Albertans and Alberta businesses would pay between $10B and $18B more in taxes every single year….”

Ted Morton is recently quoted in the Calgary Sun saying Alberta will have to cut spending and raise taxes. “The shortfall is so big. We can’t keep loading debt on the next generation. That is not what conservatives do” according to Minister Morton.

Why Not Charge and Collect Responsible Royalty Rates?
Well let’s talk a bit more about intergenerational fairness and the fiscal realities of Alberta today. What if we actually collected the royalties owed by the energy sector and stopped the high subsidy rates. The Auditor General estimates the Alberta government leaves about $2B per year on the table from uncollected royalties in the conventional oil and gas sector every year from 2006. In addition we subsidize natural gas drilling between $1.5B to $3B in foregone royalties. We are doing this at a time when commodity prices and supply gluts tell us it is folly to drill for more gas because all more supply will do is ensure prices stay low and Alberta’s royalty take will continue to languish.

By not charging reasonable royalties and not collecting those royalty rents on the non-renewable resources owned by Albertans the government is irretrievably squandering the birthright of future generations of Albertans. That is something Minister Morton says Conservatives don’t do.

Eliminate Flat Tax or Keep it & Put in a Sales Tax!
The other thing we could do is to eliminate the flat income tax and return to a progressive tax model. Alternatively we can retain the flat tax but institute a sales tax based on consumption and add a progressive tax element back into our system and raise much needed funds. This would bring in enough money to cover the deficits and still leave Alberta as the most tax competitive province overall.

Can we Look Our Kids in the Eye if we Don't Resolve the Problem Now?
It was way back in 1994-94 when our government consciousness caught up with the fiscal sentiments of Albertans and took on the challenge to eliminate the accumulated debt and stop deficit budgeting. One of the key motivations of the people of Alberta at the time was the unfairness debt and deficit was to future generations. Debt and deficits were seen as mortgaging the future of our children. When the task was accomplished Premier Klein said “we can look our kids in the eye again.”

Well we have the same shame now in looking future generations in the eye as we fail refuse or neglect to charge and collect responsible and reasonable royalty rents from our non-renewable resource energy sector. By failing to require and enforce restoration and reclamation practices for roads, wells sites, seismic lines and other disturbances inherent in the development of the energy sector we leave a negative legacy for our children to contend with. By not having adequate protection and enforcement of land, water and air standards we put an additional burden on future Albertans.

The 2010-11 Alberta Budget cycle has just started. The news is not good but the solutions are in the hands and within the power of Albertans to take on, control as resolve “adults.” It will take political will to accomplish the tasks but Albertans forced the political will on its politicians before - in 1993-94 over debt and deficit. Will Albertans once again take personal responsibility to resolve and adjust to the current fiscal realities and choose not to delay or defer them as a burden on future generations?

On-Line Voting is No Panacea

The Enlightened Savage has Kirk Schmidt as a guest blogger on on-line voting. He does a very thorough and thoughtful analysis. I say that because his opinion is the same as mine. Give it a read if you are interested in citizenship and democracy.

Canada & Alberta Caucuses to Discuss High Speed Rail Between Edmonton and Calgary

The Calgary Herald and Edmonton Journal are reporting that the Joint Canada-Alberta Caucus meeting being held in Calgary today will discuss the Alberta report on a high-speed rail link between Edmonton and Calgary.



This is great news. I am a big proponent of HSR for the Edmonton-Calgary Corridor for environmental, economic and social reasons. I was involved in the concept way back when I met with Jan Reimer and Al Duerr as the Mayor's of Edmonton and Calgary on the idea. In those days Japan was interested in participating in the project but it never got traction with the province. Now there are a number of potential options for a high speed rail link in the Alberta Corridor. This is an idea whose time has come and I know Premier Stelmach is a strong supporter of the idea as well and has been all the way back to his days as Minister of Transportation.


Alberta is trying to leverage is green image with the $2B commitment to carbon capture and storage and for a place of 3.5 m people that is an impressive investment. There is lots of good stuff to do in CCS but it is not as sexy as HSR would be as a global attention getter about Alberta getting green. Public Relations is not a justification for such a big policy decision but given how badly beat up the Alberta image is internationally, some positive environmentally PR that also enhances the economy at the same time would not hurt.


With 10m passanger trips between Edmonton and Calgary in 2006 and projections for that to grow significantly over the coming years means the need now is also partly political as a green initiative of the province. HSR is also an enormous economic generator as well as a providing societal benefit for the relationship of the closer integration and differentiation of the two cities. HSR has the potential to control growth in the corridor and ensure we don't succumb to sprawl as growth in the corridor expands.

Here is a link to the Market Assessement report recently done for the Alberta government. I will have to find some time to read it carefully. I recommend Albertans do the same.

It is audacious and bold but what better time to proceed on such an undertaking for Alberta than now? Build that train Mr. Premier.

Stelmach Premier's Council for Economic Strategy is a Smart and Timely Move.

It is a positive and profound move by the Stelmach government tap into some great minds and invite some fresh thinking into the future of Alberta. The Premier's Council for Economic Strategy differs significantly from the Klein era efforts in the Growth and Future Summits. Both events produced some worthwhile and interesting outcomes. But there was no real political will in those day to pursue anything forward thinking. It was all about reducing deficits and debt as fast as possible. The future would have to take care of itself as we focused only on the present fiscal agenda of the province in the Klein days.


I think the current Stelmach initiative is a forcus on foresight and that is significantly different. First it is intentional whereas the Klein efforts were mostly damage control or political response arising from musing of the former Premier. Second I assume there is positive political will to pursue the possibilities that will emerge from the PCES. Finally, the participant in the Stelmach process are past being impressive they are accomplished but also wise in the ways of the larger world and the changes that are bearing down on all of us.

There are 12 members of the PCES and they are all noteworthy and accomplished people with a range of expertise and a depth of experiences. Two PCES participants that are particularly impressive are Sir John Bell (Oxford and Stanford) and Juan Enriquez (Harvard) who are deeply involved in genetics and genomics but in very different ways. These are not the conventional kinds of minds one would by default apply to pondering the future of Alberta given their backgrounds. That is exactly why they are impressive appointees to the PCES.

I have met Juan Enriquez and been exposed to is fertile and curious mind over lunch and in other conversations. I have to admit I am very impressed with anyone who presents at a TED Conference and Juan has done so many times on a range of topics. A YouTube search of Juan Enriquez will give you a sampling of this man's mind.

Alberta is poised for a new era and ought to be leading toward that new era. We have an educated, diverse, young, healthy and prosperous population. We are sitting on the largest reserve of fossil fuel energy resources on the planet along with a stable government and easy access to the American market. Hewers of wood and drawers of water are not sustainble economic nor environmental presumptions for Alberta's future any more.

In the past this energy sector success has lead us to only consider the low hanging fruit of conventional oil and gas development. With the move to oil sands development and the synthetic oil and now synthetic natural gas coming from coal deposits we have potential for some adaptive foresight opportunities for the province. There are social and environmental consequences to growth as we have seen particularly form the last boom. A more integrated, full cost accounting and longterm lifecycle view has to become the new norm for defining progress and prosperity for Alberta.

What is also needed to secure a prosperous future for Alberta is a new mindset. That means we need to explore options beyond energy and options to look at energy in a new way, including new markets in addition to the Americans. A prime option for a new mindset about markets and opportunities is for Alberta to look seriously at India. My business partner, Satya Das, recently wrote a paper on the potential for an Alberta-India alliance you will find interesting.

I am very encouraged by the formation and composition of Premier Stelmach's Council for Economic Strategy. I am even more encouraged by its mandate to seek out and "develop ideas to ensure Alberta's continued prosperity and quality of life over the next three decades."

I see this initiative as a new pioneering spirit designed for the new times we are facing and about to face as a province. I plan to revisit the Growth and Future Summit reports but only for some background and context of past thinking. What we need is new thinking that may even be foreign to the typical Albertan consciousness. That is what I hope to see for the PCES and with men like Bell and Enriquez on board I am pretty confident that will happen.

Beware and Be Aware of the Political Back Story at the Calgary Stampede

The Calgary Stampede is in full swing and so is the political back story that happens concurrently with the midway, rodeo, pancakes, BBQ and bull riding. The Stampede time has a serious political dimension too. It is when the Alberta and Canadian political class converge on Calgary to party but also to position, plan and even posture a bit. The eastern political leaders like Ignatieff and Layton and May show ostensibly to show they value, "get" and embrace the west.

Many goofball pictures of out-of-character "city slicker" eastern politicians costumed up in in urban cowboy gear "grace" the pages of the newspapers and television newscasts over the years. Ironically no such picture as been so devastating as Calgary's own Stephen Harper for showing laughable unauthentic caricatures. My guess is shortly after that Harper hired a wardrobe and image consultant on the taxpayer dime.

Where politicians gather so will political consultants, lobbyists and various hangers-on and fast-track Wanna-Be's. The vast array of Stampede BBQ and breakfasts are meet and greet/grab and grin gabfests in the good old fashioned tradition of politics. There are other events that are more serious politically and they are mostly behind closed door meetings with, between and amongst the politicians go have made the pilgrimage to Calgary this week.

There are lots of private events and meetings with lobbyists and government relations consultants representing various special interests and politicians. But these meetings happen all the time and are simply part of Canadian political culture. Full disclosure, this is part of the work that I do professionally. I just never did it at the Stampede, at least not yet.

The more interesting political meetings will be the pure political events amongst politicians themselves. They are the joint Federal and Alberta caucus meeting and the Alberta Caucus Meeting on Monday. There are lots of Alberta-Canada complex political and critical policy issues in play between Ottawa and Edmonton. It seems, from an Alberta perspective, that there is no difference as to who is in power in Ottawa. Ottawa is still Ottawa even with a Conservative government in both jurisdictions. Shared partisanship seems to be irrelevant to finding effective resolutions on fed-prov issues and on US-Canada relations that impact Alberta.

In fact it is Michael Ignatieff, the Liberal, who seems more in tune and in touch with Alberta's aspirations. He is more informed and focused on our issues these days than Harper the Calgary Conservative. Will it make a difference in the forthcoming federal election? Who knows but Ignatieff's overt support for responsible oil sands development and insight into the Alberta angst and our importance to the country are being noticed in this province.

To be a fly on the joint Fed-Prov caucus meeting would be great fun. It would also be informative about where Harper sees his power and purpose in the months leading up to an inevitable election. Will we know what was said and what was the atmosphere in the room? Not likely. There will be media measured platitudes and strict speaking notes of having frank discussions and both sides having a better understanding of the issues and a mutual commitments to seek satisfactory solutions Blah, Blah, Blah.

The other critical political meeting that happens in Stampede week is the Alberta PC Caucus meeting. This is the real start of the next budget cycle. They get a serious sense of where things are at, what is happening in the province in a kind of SWOT analysis (Strength, Weaknesses, Opportunities and Threats). Some preliminary policy and political objectives are usually set at this caucus meeting. General guidelines are determined for the administration to start the next budget cycle and the next years fiscal/policy/planning process starts as a result of this PC Caucus meeting. The whole thing will start to gel at the Cabinet and Caucus retreats in the Fall when the administration comes back with their budget and policy suggestions for the government for the coming fiscal year.

So tomorrow the Alberta government process about the fiscal and policy planning for the province starts. Ever since the retreat from the royalty review recommendations, the province as become more and more strategically incoherent. Lets hope tomorrow they find their footing and start to figure out a consistent, comprehensive and comprehensible path forward for Alberta. It will not be easy in these uncertain time, but it will necessary for the people of this province to continue to enjoy a high quality of living in economic, social and environmental terms.