Sep. 26, 2012 - Issue #884: Strangelove
Consultations are passé; time for action
Alberta's fiscal planning needs to focus on saving non-renewable resource revenue
How many times do you have to hear the same thing, in different ways and from different sources, before you actually believe it and do something about it?
As the parent of teenagers, it sometimes seems that there is no limit to how many times the same refrain can be repeated without resulting in a change in behaviour. Although frustrating, this is understandable when dealing with hormone-laden adolescents who are trying to find their footing and way forward in life. But how do we explain it when government displays the same reluctance to act on oft repeated advice and recommendations?
The Alberta government is currently in the midst of a consultation on the development of a savings policy and fiscal framework. The objective of this consultation, according to the government’s own documents, is to “look at how savings are used, the appropriate use of borrowing for capital, and how to reduce reliance on resource revenues.” The consultations will also seek input on the future of the Heritage Savings Trust Fund.
On the surface, this all looks like a positive step. The government is acknowledging that it cannot rely on non-renewable resource revenues forever and that it needs to implement a savings strategy to ensure a revenue stream for the future. Implicit in the government backgrounders accompanying the consultation is also the clear understanding that the province needs to reduce its dependence on resource revenues to fund its public services and infrastructure.
But that’s just on the surface. Do a little digging into our province’s recent history and it becomes painfully clear that we’ve had this conversation—ad infinitum. From the 2011 report of the Premier’s Council for Economic Strategy, to the 2008 report of the Financial Investment Planning and Advisory Commission, to the 2002 Looking Forward consultation on the uses of the Heritage Fund, the government has received no shortage of input from Albertans on how to proceed with fiscal planning for the future.
Beyond all those consultations, there has also been a plethora of reports published by think tanks and advocacy groups from across the political spectrum over the last 10 years making recommendations for a new fiscal framework for the province.
What makes the province seem like a stubborn teenager is the fact that all of these consultations and reports have said essentially the same thing: the province needs to redirect a significant portion of non-renewable resource revenues from general revenues to savings and ensure that our public services and infrastructure are funded primarily through our tax revenue.
The rationale here is pretty straight-forward, relying as heavily as we do on oil and gas revenues (historically around 30 percent of our revenues come from non-renewable resources) means that our ability to adequately fund public services without running deficits goes up and down wildly with every change in the world price of these commodities. It also means that we are liquidating our main capital assets and then spending the money as soon as it comes in. Assets need to be converted to assets, not spent. Imagine selling your house and blowing the money on a big party without considering that you’ll need somewhere else to live once the party’s over and the money’s gone.
Taxation is the most stable and predictable source of revenue that any government has access to. As such, this is what should pay for our services and infrastructure. It also has the side benefit of drawing a direct democratic link between our contribution to the collective pool of money and the services that are provided with that money.
So after numerous consultations and reports from groups as diverse as the Parkland Institute, the Canadian Taxpayers’ Federation, the Canada West Foundation and others all saying essentially the same thing, what Alison Redford and her government have decided to do is hold another consultation. What are the odds that this consultation will yield the same advice and recommendations as the previous ones? How many more times will the government have to hear the same message before it actually decides to act?
The way forward is clear, and there is broad agreement across the spectrum in this province. We need to reduce volatility in our provincial revenues, make sure that tax revenue matches public service expenditures, and begin saving our non-renewable resource revenues so we have something to show for them in the future. It’s time the government stopped acting like a stubborn teenager and actually changed its behaviour based on the advice that those around it have been repeating for years—we need action, not another consultation.
Ricardo Acuña 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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