This is the 9th consecutive week of me planning to do a blog every second week and the ninth consecutive week of “news” preventing me from doing that exact same thing. Just when I think I’ve escaped, they keep dragging me back in! I should be called the blogfather. And Al Pacino can play me in the movie. Come to think of it, Al would be a good choice – we bear a resemblance, even if my true doppelganger is Jon Hamm.
Anyway, enough about me. Let’s talk about Danielle Smith. Really? Do we have to? Yes we do. Why? Because she is in the news again. I know. Look, it’s going to be this way until the election in May so deal with it.
So what did Danielle do this week anyway? Well she and her UCP government released a pre-election budget – a rarity in Alberta (ooh). And it’s a doozy. Or as I like to call it, Danielle Smith’s Missed Opportunity.
You know what this budget needed to be? Plucky.
You know what this budget needed to be? Sagacious.
You know what this budget needed to reflect? Transition.
That’s right, it needed to be bold, forward-thinking and acknowledging of the future of this province. Instead we got a package of election baubles we neither thought we needed nor, I suspect, knew we wanted.
A hodge-podge of throw away under the guise of “charting a new course” and “investing in Alberta” that in actual fact does neither.
Cannon fodder for the opposition NDP that has a well-thought out 107-point plan to address Alberta’s ills, restore healthcare, invest in our youth, execute the energy transition pivot to perfection and put all Albertan’s asleep on the way to letting a potential win slip through their fingers. At least that is what the polls and my gut say.
So why do I say “Missed Opportunity”?
Because it could have been so much more. It could have had vision. Chutzpah. Panache.
Sure we got some dough for schools – but only certain schools and not post-secondary, funding for which is down 31% on a real basis since 2019. But hey, if you want to build a private or charter religious school in rural Alberta there is funding. Just don’t try that shit in bursting at the seams Calgary – we get one new school for a projected 8000 new students. Remember, Danielle is only targeting a few seats here to secure a majority – she doesn’t think she needs the city. Missed oppo.
Infrastructure? This is a Trumpian budget – the infrastructure plan comes in 2 weeks.
Healthcare – some funding has been restored and a bit of an inflation and population growth shell game – plus a whole shwack of new federal transfers (how’s that Sovereignty working out?). So doctor peace for a bit, I guess until the post-election budget when the vaccination funding gets eliminated? Just guessing on that one.
At least there were no more unasked for and unnecessary handouts to industry – I guess that $20 billion grift is better swept under the rug lest they upset the electoral apple cart. But it’s still the plan. Pay attention.
The industrial policy remarkably devoid of any policy. Or industry for that matter. Where is the vision for the energy sector as it transmogriphies with the rest of the world. I mean Hope is free so that saves us a few shekels, but people are waiting – on CCUS, on hydrogen, on Petchem. Not on R*. Where is the plan? What about other industries? Remember those? We have a lot of those. Where is the accelerated funding for TV and Film Production? Is The Last of Us destined to be the Last of its kind? Hmm
Similarly, the gas tax cut, the energy rebates – no update. Presumably they expire post-election, unless of course you vote correctly…
But hey, at least spending has increased… to its highest level… EVER! All thanks to, you guessed it, resource royalties.
Yeah, that’s right. They be back baby. A veritable gusher of cash coming from the oil patch. Hallelujah! $25 billion plus of cold hard loonies and twonies from the sale of energy transition defying sludgy gassy molecules. Man, is it great to live here. We are rich. Rich I tell you. At least for a bit. And it sure makes government look smart, relying on a revenue stream that depends on Chinese energy demand and Vald “the Impaler” Putin’s imperialist ambitions.
That one thing that we always say we need to stop relying on? We are relying on it more than ever. Go figure.
But that’s OK, because we are putting the spare change from the sofa cushions into the Heritage Fund. Sort of. We have some formula for splitting the leftovers. It’s like 50/50. Unless there is a pet project. Then it is pet project first, Heritage Fund second. Who wants to compete with Norway anyway.
You know what I would have paid money to see from Danielle?
A Pragmatic Sagacious Transition.
A Personal Smith Tossup.
A PST.
What’s that you say? Paying attention finally I see.
You know, a Proposal to Stabilize our Treasury, so our kids will still speak to us in 25 years when, as everyone assures me, the energy industry will be all but gone and the God Emperor Justin Trudeau will be in the 37th year of his Chinese sponsored reign of terror.
Thusly I present a modest Proposal to Stabilize our Treasury
Or, alternatively, a way to address our Paucity of Savings and Taxes.
Because notwithstanding our surplus, we stand on a razor’s edge – it’s grim and Pretty Scary Times.
As we all know, the pandemic, combined with the downturn in the energy sector, took a chainsaw to Alberta’s financial situation. The deficit exploded from a fairly pedestrian $8 billion (in Canadian terms) to close to $25 billion. Debt rose to close to $100 billion. Those are Prodigiously Startling Totals.
Fortunately, commodity prices have rallied amazingly since then such that we feel like we are finally back to Pretty Solid Times.
Yet I remain concerned. Even as we report an improving financial situation. You see, here in Alberta, as I alluded to above, we get fat, drunk and stupid when commodity prices run wild. We think royalties are a predictable revenue stream when they are high because we have fossil fuel Price Sustainability Tunnelvison.
But that’s a fool’s game. If the last 100 years have toaugh us aanything, it’s that we can’t depend on commodities. With so much agriculture in this province you’d think that would be in our DNA. But it ain’t.
With so much of our budget leveraged into the one thing that we don’t control (oil prices), we are setting ourselves up for a major fiscal disaster if prices come off substantially in the next few years given that record royalties are funding record spending. It’s a Potentially Suicidal Tightspot.
What to do?
Well, hear me out here. How about now, now that times are good, we have a frank conversation as a province about the way forward. How to mitigate the royalty conundrum with a more predictable revenue stream.
And what better time to do it than during an election?
We could call it a Pecuniary Shortfall Townhall.
The UCP has made a significant effort to reduce deficits by the usual means – cutting the budget and reducing spending = at least until now. It has cost them politically across every constituency (whether physical as in districts or philosophically as in cohorts (how I hate that word)) and, quite frankly, these Politically Suicidal Trimmings could have potentially cost them re-election in May if Danielle hadn’t opened the spigots under the guise of restraint.
And we can argue all day long whether this cut or that cut was needed and whether a pitched battle with the health sector and Universities – the Physician Showdown Tussle and the Post Secondary Terminations – were the smartest things to do. It is all now water under the bridge.
We have addressed the spending side, we cut and then we increased. We have wrested the Profligate Spending Trend to the ground and we are now fully prepared to belly up to the bar now that the royalty merry go-round is back in full gear. Ain’t no cutting happening when oil prices are at $78 – the people won’t stand for it. So now we need to look higher on the P&L to feed our prodigious appetites.
That’s right, now is the time for Alberta to grow up and address revenue. And no, I’m not talking about adjusting royalties and a new Petroleum Sector Tariff regime.
And I’m not talking about wishful thinking about a Permanent energy Sector Turnaround or a slow-moving diversification effort or the holy grail of stable prices. I count on that as much as I count on Justin Trudeau writing a business case for LNG exports.
I’m talking about new sources of revenue and what we can do as a society to reverse the commodity price roller coaster risk to our province and get ourselves back on a more stable, predictable fiscal path. A Price Stabilization Tactic.
It’s time for that which we must never name. The Voldemort of Alberta politics. A third rail if you will.
But I will name it. I’m your huckleberry.
What do I have to lose except clients (sorry Dave). I’m kidding by the way. Our job is to float ideas.
A Pandemic Savings Trust.
A Provincial Scoop on Trade.
A Prioritized Salary Tariff.
A Province Saving Tithe.
A Politician Sacrificing Tribute.
A Post-COVID Sustenance Toll.
The deuce you say!
Again, to reinforce this, now that any Albertan reading this has sat up straight in their chair in abject fear of where I am going with this…
As a province we are far too heavily leveraged to the royalties we get from oil and gas.
They leave us cap in hand when prices collapse and make us stupid and spendthrift when they are high and overly dependent on a private sector industry whose investment plans are as fickle as a teenager.
They are a slot machine app on a smart-phone. No one admits to being addicted until you look at the bank account and wonder where it all went. The fiscal lifeline from the oil and gas sector that we have received this year, the “gusher of cash” saved our Alberta bacon over the last year and a bit has been a godsend to the budget, but we know it isn’t infinite.
But we need to realize that the Petroleum Station no longer has a Train. The commodity price cycle leaves us too vulnerable to the vagaries of a global market and the moronic dictators who exploit it and the well-intentioned green activists who are dedicated to eradicating it.
We need to accept that we aren’t Price Setters, but Takers and that tying the fiscal future of this province, my province, our province to the whims of a fickle market is no longer acceptable. We need to break the cycle and admit the Province is too Subject to Traders.
So what to do?
Is there a Petroleum Strategy That can work? I don’t think so. We have the building blocks in place, but there is limited fiscal room there. Do we raise royalties and chase away investment? Seems dumb. Do we wait for Trudeau to develop a business plan for LNG? Seems unlikely. And dumb. Do we wait for Trump to get reelected and re-approve KXL? Did I just write that sentence? We are pretty much optimized in the moment for production. Everyone is paying their fair share.
Don’t get me wrong, there is and always will be opportunity in the oil and gas sector. We just need to break the addiction to the money spigot and treat it as a bonus and not a source.
Our fiscal regime for the development of oil and gas is competitive. We have great rocks, an abundance of resources, a still-solid regulatory regime and a store of human capital and ingenuity that is second to none. I have written about this for years. Even when we eventually transition we will win – we have all the resources – everywhere else has all the people. It’s a simple equation. Our Provincial Scenarios are Transcendently limitless.
We have pipeline access to our major markets. We have infrastructure being completed as we speak that will provide incremental access to markets for existing and new up and downstream development for decades to come. We will soon have a wealth of Province Saving Tubes and Petrochemical Shipping Trains. And we need them and the products they produce and ship, but we need something more.
What we don’t have is fiscal stability, because we depend on Pricing, Shipping and Trudeau. And the events and fiscal gyrations of the past decade have laid this bare. For all to see. Right now. We can’t wait. Even in our present flush state, we are actually in a Predicament of Severe Temporal concern.
Jason Kenney asserted years ago that you shouldn’t raise taxes during a downturn. And I don’t disagree. Danielle Smith has asserted that you don’t raise (or threaten to raise) taxes before an election. Again, I don’t disagree. Those are Politically Savvy Tactics. But here we are, celebrating a budget surplus with a shiny new premier and maybe, now is the time to have an adult discussion. Could it be that Prosperity Subverts Truisms?
And if not now, when? When we are in year 3 of the Royalty spending party and the will to change is overrun by renewed Partying in Stampede Tents?
Based on current data, a Properly-implemented revenue (not Spending) enhancement Tool of say 5% could raise between $5 billion and $8 billion for the Alberta treasury and would also shift the fiscal capacity balance in Canada such that the impacts of equalization could be less glaringly slanted one way across the Canadian Shield, primarily because we would be raising more cash here at home and would be less reliant on the federal transfers we may or may not receive. It’s a veritable Provincial Sovereignty Tool.
You can make it Progressive Scrupulous and Tolerable by modelling it after similar programs currently in use by the Federal government. We can Pursue the Same one Trudeau uses. We don’t even need our own administration; we can just harmonize our efforts with the Generally Stable Treatment used by the Federal government. Or we could do it ourselves. Who really cares?
The last few years have been incredibly challenging moments in our province’s history – a Particularly Stressful Time. We can’t keep doing the same old, same old. We need to diversify our economy and create new revenue sources. We have a budgetary conundrum that is of our own making that is continually whipsawed by events out of our control. It’s time to take that control back and Predictably Source Treasure.
I know it’s not a terribly inspirational rallying cry and sending it out under cover of darkness is a bit weaselly, but here it is.
Danielle Smith – I’m a grown up and I am willing to let you tax me more. As long as you provide proper rebates to make it progressive.
I’m willing to pay up to 5% more when I am at the grocery store. I want out of province tourists to pay 5% more to stay in our beautiful hotels and parks and eat our wonderful, creative restaurant fare. I want out of province companies and multinationals to pay us a little more to use our capital and human resources. I want a small coffee at Tim’s to sell for $1.40 instead of $1.33. I want all these other People to Share in the Task ahead of us. I want our finances to no longer be in a Perpetual State of Transition.
It’ll be OK.
It’s for the good of the province. It’s for the next generation. It’s a bold move that if implemented and communicated properly shouldn’t threaten your electoral chances.
I mean you’re looking at it anyway, right? Isn’t that why you let Finance Minster Travis Toews float the idea of a revenue review in front of the Calgary Chamber of Commerce yesterday? I see what you’re doing.
Then you can take all that excess royalty revenue and actually increase the value of the Heritage Fund dramatically. Or build roads. Or properly fund the university my kid is going to next year. You pick.
It’s Provincial Saviour Time.
And if you have a Problem Saying it Thunderously, I’m happy to take the flak and do it for you.
Give us a PST.
A Provincial Sales Tax.
I’d vote for that.
Hmm. I said it. And I didn’t get struck by lightning.
That’s a Pretty Surprising Turn of events. I think you’d agree.
If you have any questions, give me a call. I’ll be hiding in my basement. But you know I’m right.
