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'Alberta faces a critical financial situation': Government panel recommends sweeping reforms

Janice MacKinnon, a former Saskatchewan finance minister, and chair of a blue-ribbon panel announced to examine the Alberta government's financial situation.
Janice MacKinnon, a former Saskatchewan finance minister, and chair of a blue-ribbon panel announced to examine the Alberta government's financial situation.

Education funding tied to performance, legislated public service salaries, more project costs downloaded onto municipalities and the use of private services in health care form a handful of the 26 recommendations in the MacKinnon panel report unveiled Tuesday in Calgary.

Not a sector of government spending was sacred in the review, with sweeping reforms suggested in health, education, the public service, capital spending and how the government delivers programs to its citizens.

The report also came with a stark warning — operating expenses must be cut by at least $600 million to have any hope of balancing the budget by 2022/23.

Coupled with forecasts of pending unemployment growth and a weaker economic outlook, the report paints a grim picture of Alberta’s coffers.

A hand-picked UCP panel headed by former Saskatchewan finance minister Janice MacKinnon authored the 77-page document, which came alongside a 150-page fiscal analysis by accounting giant KPMG.

If one were to boil down the report to a single message, it would be this: The government must rethink how and what services are delivered via the public purse.

‘Decisive action’ critical

In plain language, the panel spelled out the need for Alberta to look beyond short-term, quick fixes, and explore new approaches to public service delivery.

“Without decisive action, the province faces year after year of deficits and ever-increasing debt,” it wrote.

Changes recommended by MacKinnon and her panel encompass everything from assessing the financial future of under-performing universities to expanding nurses’ scope of practice and completely overhauling K-12 and post-secondary funding models.

It often pointed to legislative tools to help the government in its quest for fiscal restraint, be it strong-arming a physician payment model agreement with the Alberta Medication Association or setting public sector salaries.

The panel pulled no punches as it ground through government spending, blunt in its assessment of Alberta’s “critical financial situation” and the need for “decisive action.” The phrase “difficult choices” reared its head again and again.

The report repeatedly hammers the need for fundamental transformation and provides the new UCP government with the political cover and social license to undertake sweeping change.

In her 2003 book Minding the Public Purse, MacKinnon recounts steps her own government took to address Saskatchewan’s bereft coffers in the 1990s. She wrote that a similar independent panel in her province was fundamental in garnering public support for the tough choices ahead, and “reflected the need to establish credibility with a cynical electorate.”

In essence, it built trust ahead of controversial decisions.

It’s likely the current Alberta government will take a similar tack, but it remains to be seen whether Premier Jason Kenney and his cabinet have the political appetite to stomach such drastic changes.

Finance Minister Travis Toews said his government doesn’t yet know what percentage of the recommendations it will adopt.

Right now, he’s wrapping his head around the report to fully understand the panel’s proposals. From there, he told Postmedia, his government will develop its long-term plan around “financially responsible decisions.”

“We’re still considering (the recommendations) relative to our budget deliberation process, but I think Albertans expect this government to deliver responsibly,” he said.

“Where long-term that’s going to require transformational change, we’re going to be considering that.”

‘Procrastinating will only worsen the problem’

MacKinnon’s work in Alberta is the latest in a series of fiscal panels she has chaired at the behest of conservative governments.

In 2014, for example, she headed a federal Economic Advisory Council to provide advice on fiscal, economic and financial issues under former prime minister Stephen Harper. She completed a similar quest for the Progressive Conservative Manitoba government in 2017.

Considering that work and her draconian cuts in Saskatchewan as finance minister, the recommendations in the report released Tuesday should come as little surprise.

Some also overlap with the UCP election platform, including repositioning post-secondary to become more workforce-focused , pursuing public-private partnerships and opening Alberta’s health system to more private and non-profit choices.

For most of its work, the panel compared Alberta with Canada’s three other largest provinces: Ontario, Quebec and British Columbia. It paid particular attention to health as it combed through spending, given the sector comprises 42 per cent of the provincial operating budget.

It’s not all bad news — Alberta has outpaced all provinces in GDP growth over the last 20 years, the panel found, with gains in almost all industries exceeding the national average and diversifying the economy.

Those silver linings will ease the task of making challenging decisions, but the panel cautioned it won’t be simple.

“Spending in all program areas should be reviewed, with a view to restructuring or eliminating lower priority programs and services, achieving greater efficiencies and effectiveness, and bringing Alberta’s spending into line with other provinces,” it wrote.

The panel urged government to combine a fundamental shift in spending with policies to prevent future governments from running consecutive deficits and accumulating debt.

“If a plan is developed and implemented to balance the budget over the next four years, challenging decisions will be required, but the future will be bright,” the panel wrote.

“Procrastinating will only worsen the problem, make the choices more difficult, and delay the time when Albertans can reap the benefits of balancing the budget.”

By reviewing current and projected fiscal information and trends, the panel concluded that “Alberta faces a critical financial situation,” which is perhaps worse than that faced by the Klein government in the 1990s.

Although revenues weren’t part of the panel’s mandate, it nonetheless delved into Alberta’s ongoing natural resource roller-coaster.

At the heart of the problem is Alberta’s tendency to spend more when natural resource prices increase, but not rein it in when oil and gas see sharp declines.

“This exacerbates the structural imbalance between revenues and expenses and leads to rapid increases in the province’s debt and eventually necessitates painful fiscal adjustments,” the panel wrote.

For Toews, the recommendations in the report didn’t surprise him so much as the way the panel highlighted what he called Alberta’s “spending problem.”

“This report does a great job of laying out the challenge that faces us as Albertans, and that is we having a spending problem of epic magnitude,” he said.

 Copyright Postmedia Network Inc., 2019

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