Alberta faces many tough choices

The problem with having a great party is that there comes a point when it has to end. And the wilder the excesses, the more wicked the hangover.

The problem with having a great party is that there comes a point when it has to end. And the wilder the excesses, the more wicked the hangover.

For Albertans, it’s time for two Tylenols and lots of bed rest.

Alberta’s decade-long love-in with the good times was a heck of a run: Soaring resource revenues allowed the province to flaunt comparatively low tax rates, high employment, a claimed debt-free status – their freewheeling former premier Ralph Klein even saw fit to send everyone a $400 “prosperity” cheque. Just a short year ago, it seemed the good times would never end.

How quickly the worm has turned. From fiscal darling of Confederation, Alberta is now struggling with realities that, in the heady days of $147 per barrel oil, seemed almost inconceivable. “A Progressive Conservative government will never put Alberta back into a deficit position,” Premier Ed Stelmach declared back in February 2008. By December, he had to concede the province was “looking at a technical deficit,” even though balanced budgets were mandated by law.

Recently, the deficit was a lot more than “technical.” Stelmach’s government announced the expected $8.5-billion surplus for the 2008-09 budget year has turned into $852 million shortfall. Finance Minister Iris Evans, meanwhile, has projected accumulated deficits of $10.3 billion over four years, and hinted that onerous 1990s-era budget slashing may be just around the corner.

From a rosy peak, Alberta’s fiscal position has suddenly plummeted to its worst state since 1986, when a crash in energy prices led to an eventual provincial debt of $23 billion.

The problem, as it has always been for Alberta, is the unhealthy reliance on volatile resource revenues.

Meanwhile, generous tax cuts delivered during the heady days – most notably, an elimination of $1 billion in health-care premiums – are coming home to roost at an inopportune time. Coincidentally, the Alberta Health Service board announced this week that its budget shortfall for the coming year is $1.1 billion.

All of this has throttled the job engine, as well. May’s unemployment rate rose to 6.6 per cent, the highest since October 1996, and nearly double the 3.6-per-cent rate in May 2008.

Alberta faces two possible outcomes: The first? It relies on good luck – a quick turnaround in oil and gas prices as the world economy recovers. But, waiting for the fiscal cavalry would be a foolish move, with oil prices projected to stagnate below $60 US per barrel, and natural gas settling in around C$5.50 per gigajoule, down from last year’s $7.

So, the more likely scenario is the grimmer one – aggressive budget slashing not unlike the wholesale cuts that divided the province along ideological lines back in the early 1990s.

Grim-faced Treasury Board president Lloyd Snelgrove seemed to be the bad cop, softening up the citizenry recently.

It might be hard for many Canadians, particularly in hard-hit Ontario, to feel much sympathy for this western province. After all, there was a distinct cockiness in the way “The New West” asserted its newfound position of fiscal superiority this decade over Central Canada in particular. One might even be forgiven for experiencing a fleeting moment of schadenfreude at Alberta’s misfortune.

In a desperate effort to build the roads, sewers, school and hospitals its new citizens demand, Alberta has been spending three times the national average on infrastructure.

Meanwhile, while Stelmach has shed the hard-line fiscal conservative ideology of his predecessor, there appears to be no consistent policy in its place.

For the sake of all Albertans, this ideologically agnostic, govern-by-polls regime needs to find the spine to do that.

Doug Firby is a columnist for Troy Media Corporation.

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