Budgeting to go broke
| Posted: Wednesday, Sep 05, 2012 06:00 am
We can only assume the Alberta government has bureaucrats — lots and lots of bureaucrats — who are presumably experts in their particular domain. We saw that when debate emerged over top health officials’ pay and perks. Those who defended the pay argue that a $500,000 a year salary is necessary to attract the best people. Look at what the ‘best people’ have done to our health-care system.
And so it goes when we talk about Alberta’s finances. Prior to the April 23 election, then-minister of finance (and outgoing MLA) Ron Liepert told a breakfast crowd at the Sturgeon Valley golf course that Alberta projected the price of a barrel of oil to remain around $108 US. At the time, oil was hovering around the $107 mark, and Liepert used that price to show how smart he and his government were.
The province based its budget on oil prices averaging $99.25 US. This price wasn’t picked out of thin air, we were told. No, no, it was industry experts who said oil prices would stick close to the $100 level. And the bureaucrats, presumably, did their own analysis and concurred with the prediction.
So, our government budgeted on the high side of revenue expectations. It’s kind of like saying you’re sure you’re going to get a big promotion and earn a lot more money this year, so you go out and buy that Lamborghini today without actually getting that promotion.
Lo-and-behold, the government was wrong. Oil prices dipped close to $80 in June and have averaged a little over $92 a barrel since. If this trend continues for the rest of the year, government estimates could be off by $1.5 billion. Finance Minister Doug Horner said if the trend continues, adjustments will have to be made.
“Whether that’s an operating adjustment, a capital adjustment, a combination of the two, that remains to be seen and decided,” Horner said this summer. Politically, it’s easier to cut capital projects than it is to cut operating spending. It’s easier to say no to pavement and bricks and mortar than it is to say no to public sector unions and chopping a bloated bureaucracy.
According to the Canadian Federation of Independent Business, public sector salaries, surprise, surprise, are out of whack with the private sector. A study done at the end of 2008 shows the average public sector salary to be $56,654, with a comparable private sector salary of $51,419. That’s a nine-per-cent gap, and one that makes it difficult for the private sector to compete in the job market. So much for the idea of needing higher salaries to attract the best people. Indeed, they’re already beyond that point.
Governments will say and do anything to get elected. In this case, the Alberta Tories painted a rosy commodity picture that hasn’t come to fruition. Horner said all departments have been asked to find $360 million in savings, and that number could go up considerably if oil prices decline. One has to ask: If all departments can find $360 million in savings and still continue to operate, just how bloated is the bureaucracy? We could forgive them for their lack of budgeting prowess if they’d get serious with the expenditure of our tax dollars.