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

In early May, Premier Jason Kenney listens to Janice MacKinnon, a former Saskatchewan finance minister, and chair of a blue-ribbon panel announced to examine the Alberta government's financial situation. Findings from the report were released this week. Greg Southam/Postmedia

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The UCP government’s four-year mandate could include performance-based education funding, legislated public service salaries, project costs downloaded onto municipalities and private services in health care, if it adopts a host of recommendations contained in a government-ordered report unveiled Tuesday.

Finance Minister Travis Toews wouldn’t say how many of the recommendations his government will follow, but there’s no doubt the MacKinnon panel report will guide the UCP government over its four-year term.

“We’ll be putting a lot of stock into these recommendations, there’s no doubt about it,” Toews said.

Twenty-six recommendations jammed the 82-page report authored by the MacKinnon panel — a group hand-picked by the UCP to examine Alberta government spending. It was headed by former Saskatchewan finance minister Janice MacKinnon.

The report came complete with a 150-page fiscal analysis by accounting giant KPMG and issued a stark warning: Operating expenses must be cut by at least $600 million to have any hope of balancing the budget by 2022-23.

No 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.

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

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.

But it was the suggested changes to health — which comprises 42 per cent of Alberta’s operating budget — that had the Opposition crying foul.

Slamming the report as little more than a political flak jacket for the UCP, deputy NDP leader Sarah Hoffman pointed to the over-sized piece of cardboard signed by now-Premier Jason Kenney during the election campaign.

Kenney used the prop to promise a UCP government would maintain or increase spending on Alberta’s health-care system, Hoffman said, but that flies in the face of the MacKinnon report recommendations.

“I think Albertans have every right to be worried,” she said.

‘Decisive action’ critical

The panel used plain language to spell 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.

Recommended changes 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 Medical 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 licence 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.

In essence, it built trust ahead of controversial decisions, and Hoffman suspects that’s the point of Tuesday’s report.

“(The government is) trying to create any excuse … for being able to come forward with deep cuts that are really going to have negative impacts on ordinary Albertans,” she said.

“They will try to come up with whatever cover they can use.”

While it remains to be seen whether Kenney and his cabinet have the political appetite to stomach such drastic changes, Toews said he’s giving the report full deference as he develops the fall budget.

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

‘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.

Some of her final recommendations 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.

That wasn’t a huge surprise for University of Calgary political scientist Lisa Young, who suspects support for the recommendations may well be split down party lines.

What struck Young as she flipped through the report Tuesday was how many of the panel’s suggestions are long-term solutions, not short-term fixes.

The fall budget could address issues around post-secondary and health grants, she said, “but when you’re talking about structural changes to the health system, when you’re talking about a whole new vision and mission for the post-secondary sector, those aren’t things that you put in place between now and the end of October.”

The majority of the panel’s report compared Alberta with Canada’s three other largest provinces: Ontario, Quebec and British Columbia.

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.

Spending increases should be tied to growth in household incomes, the panel wrote, and a budget date should be legislated to remove funding uncertainty.

It also recommended the government contract with a reputable independent agency to assess Alberta’s fiscal policies every four years, and make the report public four months before a scheduled election.

“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.”

A spending problem ‘of epic magnitude’

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.

Mount Royal University political scientist Duane Bratt said most of the MacKinnon recommendations are straight out of that government’s playbook. He’s unsure if Albertans — or the Supreme Court, for that matter, which has made different collective bargaining rulings since then — will accept drastic cuts.

“I think (the government is) banking on that we’re in the same position as we were in 1994,” he said.

“We’re going to see much more antagonism in the legislature and coordination between the NDP and the unions outside the legislature.”

Although revenues weren’t part of the panel’s mandate, it nonetheless delved into Alberta’s ongoing natural resource roller-coaster and successive governments’ tendency to spend more when natural resource prices increase, but not rein it in when oil and gas see sharp declines.

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

With files from Sammy Hudes

egraney@postmedia.com

twitter.com/EmmaLGraney

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