Canada

Taking Advantage

Brian Bergman September 18 2000
Canada

Taking Advantage

Brian Bergman September 18 2000

Taking Advantage

Canada

Brian Bergman

Living in Alberta just keeps getting better and better.

-Premier Ralph Klein, announcing $930 million worth of energy rebates

Ralph Klein may have made his national reputation as a deficit fighter, but he never really fit the role of Scrooge. As with most politicians, Klein likes to be liked and the harsh cuts he imposed on provincial spending in the 1990s did not always endear him to the average Albertan the populist premier so frequenty extols. Last week, Klein was in a more comfortable groove, doling out more than $ 1 billion in taxpayer rebates and new spending—most of it flowing from the record $5.6-billion budget surplus the province is projecting for the current fiscal year. So how does it feel to be an Alberta premier these days? “It feels absolutely wonderful,” says Klein.

“I mean, it feels really good.”

Small wonder. Alberta’s economy is, as the premier boasted,

“firing on all cylinders.” The Ottawa-based Conference Board of Canada predicts the province’s economy will grow by 5.8 per cent this year, tops in the country. For the first six months of 2000, Alberta government statistics show a nine-per-cent increase in provincial housing starts and an almost 10-per-cent increase in retail sales over the same period last year. Unemployment stands at 5.2 per cent, below the national average of 7.1 per cent. The economy is also becoming increasingly diversified: the energy sector, which in 1985 accounted for

nearly 40 per cent of Alberta’s gross domestic product, now represents just under 19 per cent. Strong gains in the manufacturing, technology and service sectors make up the difference.

Still, the main reason provincial coffers are overflowing is increased royalties from skyrocketing world energy prices. Last week, the benchmark West Texas Intermediate crude oil price edged above $35 (U.S.) per barrel, a 10-year high. At the same time, natural gas prices have soared to $6.28 per gigajoule, nearly triple what they were 18 months ago. Klein’s

With its soaring economy, oil-rich Alberta is the envy of all of Canada

Conservative government now expects to reap record resource revenues of $8.5 billion this fiscal year. That, in turn, is opening up a wealth of options. Already, the government has committed to nearly $1 billion in new spending since its spring budget, mosdy in the areas of health care and education. With the deficit long ago eliminated, $4.5 billion of this year’s surplus is being applied to the province’s $ 12.5-billion debt, and Klein is now predicting that the remaining debt could be paid off in as little as two years. The next priority is tax cuts, with some senior Tories, including Provincial Treasurer Steve West, publicly musing about a day, in the foreseeable future, when Albertans will not pay any personal provincial income tax at all.

In vintage fashion, Klein, a former television reporter, is rolling out the good news in manageable sound bites. Five days after his treasurer announced the new surplus Figures, Klein last week praised Albertans for enduring the government’s earlier austerity program. “We told Albertans that the short-term pain would lead to long-term gain,” said the premier, “and that’s turned out to be true.” The next day, Klein held a news conference to unveil two direct rebates. The first will see all tax-filing Albertans aged 16 and over receive $300 to help offset rising home heating and gasoline bills. The sec-

ond gives all residential electricity customers a $20-per-month credit on their power bills for one year beginning in January. The week ended with the Klein government dispensing $200 million in infrastructure funding to colleges and universities.

The flurry of announcements left opposition critics sniffing an election in the air. Among the clues: the $300 fuel rebate is to be mailed in two equal instalments, the first in November and the second in April, 2001—about the time that Klein is widely expected to drop the writ. “This is not a tax refund,”

declares Liberal treasury critic Howard Sapers, “this is votebuying.” Sapers predicts Albertans will not take the bait. “With university tuition fees growing at the fastest rate of any province,” he says, “with public school classroom sizes among the highest and with many people still waiting inhumanely long periods for certain diagnostic services, Albertans are wondering if they are getting full value for their surplus.”

Others argue that “the Alberta advantage” Klein so often touts has a hollow ring to those unable to share in the spoils. Brian Bechtel, executive director of the Edmonton Social Planning Council, notes the government has not reinvested in social services, which experienced budget cuts of up to 30 per cent. “The poor are getting poorer,” says Bechtel, “and I think, with $ 5-billion surpluses, we can afford to slow that trend.”

University of Calgary political scientist David Taras says another potential peril of prosperity is what some are already referring to as “the envy factor.” As Alberta protects its residents against high energy costs | in a way that other provinces cannot af£ ford, resentment may build in the rest of | the country. “It’s the old blue-eyed sheiks 1 phenomenon of the 1970s,” says Taras. § It is also what helped prompt the 1980 * National Energy Program, an attempt by | Pierre Trudeaus government to redistribg ute resource wealth towards Ottawa by I

heavily taxing and regulating the oil industry. “If there’s a sense there’s a prosperous province that is not sharing, then all eyes could turn to Ottawa for some sort of action,” says Taras. “And that could start the Ottawa-Edmonton wars all over again.” The possibility of another federal money grab is not taken lightly in the Alberta capital. “Don’t start that nonsense in this country,” admonished West after announcing the latest surplus projections. “I don’t want our children or grandchildren to ever have to go through that.” In a similar vein, Klein responded tartly last week when a reporter asked if it wasn’t “smug” to suggest that other provinces should follow Alberta’s lead in tackling the debt. “No, it’s not smug,” he said. “These people who might be envious today should harken back to 1993-1994 and the tough decisions we made.”

Some independent analysts say the premier has a point. Peter Hall, associate director of economic forecasting for the conference board, says it is true not all provinces are blessed with Alberta’s resource wealth. “But that being said,” says Hall, “much care has been taken to put Alberta’s fiscal situation in order. In a global economy, that’s very attractive to investors.” With investment, adds Hall, should come continued economic growth—and, for Klein, the prospect of rolling out the good news for years to come. G33

HOW THE WEALTH FLOWS