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Alberta government repeating 1980s missteps with deficits, denial, and high-risk strategy for a balanced budget in 2014

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Release Date: August 15, 2011

CALGARY, AB—Alberta’s political leaders are repeating the mistakes of the province’s 1980s-era politicians with their “don’t worry” attitude towards Alberta’s deficits and overspending, says a new report released today by the Fraser Institute, Canada’s leading public policy think-tank.

Alberta politicians today are saying the same things and making the same fundamental errors as politicians in the 1980s,” said Mark Milke, Fraser Institute director of Alberta Policy and author of The Rhetoric and the Reality of Alberta’s Deficits in the 1980s, 1990s, and Now.

“History is repeating itself with assumptions that boom-time energy revenues will soon return, and that spending growth will be checked. But such illusions died hard in the 1990s. Now it’s time for Alberta politicians to acknowledge the reality of today’s overspending and institute a legislated plan to balance the budget.

”The study compares public statements by Alberta politicians from the 1980s and early 1990s—then premier Don Getty and treasurers Lou Hyndman and Dick Johnston—with recent statements from Alberta’s political leadership, including Premier Ed Stelmach, as well as successive finance ministers. The report also identifies fiscal similarities between the two deficit eras, including promises of balanced budgets, the decline in provincial assets, false starts on balanced books, and a dramatic rise in real per-capita spending that preceded massive government deficits.

Examples of government statements from both eras:

“Alberta is not in debt”

  • In his 1985 budget speech, then treasurer Lou Hyndman said, “There are few governments in the world that can match the financial strength of the Province of Alberta.”
  • In February 2009, Finance Minister Iris Evans noted that “Alberta has absolutely got more resources available to it than anybody else facing a decline.”
The four-year budget target is missed
  • By June 1989, the Alberta government admitted its earlier forecasts of a balanced budget would be delayed one year. Then treasurer Dick Johnston insisted the deficit would be eliminated by 1991/92, a year later than projected; however, it wasn’t balanced until 1993/94.
  • In a late-2010 interview, Premier Stelmach announced a four-year balanced budget deadline would be pushed off further into the future, until at least 2013/14—one year later than initially forecast.

Fiscal comparisons between both eras:

Overspending leads to deficits

  • Between 1980/81 and 1985/86—before any significant (later) decline in revenues—Alberta’s revenues rose by 49 per cent, but program spending increased by 85 per cent.
  • Between 2003/04 and 2008/09—before any significant (later) decline in revenues—Alberta’s revenues rose by 38 per cent, but program spending increased by 70 per cent.
The ramp-up in real per-capita spending
  • In the 1980s, real per-capita program spending hit a high of $11,496 in 1985/86 and took significant reductions to bring the books into balance. Real per-capita program spending declined to a low of $6,498 in 1996/97.
  • Since then, the trend-line has been mostly upward. Real per-capita program spending hit $10,235 in 2008/09, dipped slightly in the next year, and rose again to $10,204 in 2010/11.

Looking ahead, the study notes that Alberta’s plan for balancing the budget by 2013/14 is again, akin to the 1980s, based on hopes for substantially higher revenues. Problematically, the case for hitting a balanced budget is based upon three-year projections that include significantly higher revenues and a modest growth in spending, projections that rarely materialized in the past.

“Three-year budget targets are unreliable guides as to how much money the province will eventually spend,” Milke said.

“The result is that the balanced budget target for 2013/14 is subject to a high-risk strategy, and thus, to another possible delay.”



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