Fiscal experts debate how to get Alberta off boom-and-bust cycle

Alberta’s current fiscal situation is unsustainable, and requires policy-makers to make tough decisions before the province reaches a crisis point; that was the general theme of a fiscal forum hosted by the University of Calgary’s School of Public Policy in Edmonton on Thursday.

Alberta finance ministers have long battled the boom-and-bust nature of the provincial budget, which is heavily dependent on non-renewable resource revenue.

Still reeling from the recession that hit the province in 2015, the NDP government is currently running a $7.5-billion deficit, with a plan to return to balance by 2023. That plan relies heavily on a rebound in oil prices, and additional pipeline capacity to increase sales.

READ MORE: Deficit revised to $7.5 billion but Alberta grapples with oil price differential

Experts in the room on Thursday indicated they believe this model simply isn’t sustainable for the long term.

“The longer we wait to make an adjustment to what is clearly coming down the line, the harder it is going to be later,” said Trevor Tombe, an economist with the University of Calgary.

Tombe pointed to Alberta’s changing demographics as a big cause for concern. Baby boomers are retiring, causing income tax revenue to go down, and cost pressures on the health-care system to rise.

“It’s going to increase it from about 40 per cent or so of the budget now, to about 50 per cent of the budget by 2040,” Tombe said.

Experts at the forum debated different ways to deal with the fiscal ups and downs in Alberta, from slashing spending to hiking taxes, and even putting firm balanced budget rules in place.

“You can’t just talk about fiscal responsibility or balanced budgets, these rules have to be constitutionally entrenched,” argued Ted Morton, a former Alberta finance minister.

“So as soon as it’s inconvenient to balance the budget, they can’t simply change the rule again.”

The forum’s keynote was delivered by former Alberta auditor general Merwan Saher, whose final report dealt with this very issue. He believes it is incumbent on politicians to be up front about the fiscal situation Alberta finds itself in, and get started on the solutions as soon as possible.

“Make the point that there are difficult choices to be made,” Saher said.

“Let’s make those choices when we have an opportunity to make them, rather than when we’re faced with a crisis.”