It’s ironic that, during the same week that former premier Ralph Klein was made an Officer of the Order of Canada, his successors in the current PC government were delivering speeches outlining the need to borrow money because it would be irresponsible to saddle future generations with an infrastructure deficit.
Speaking at the Sturgeon Valley Golf & Country Club on Wednesday, Finance Minister and local MLA Doug Horner made a compelling argument for the need to borrow to invest in infrastructure and frankly pooh-poohed the concept of infrastructure deficits. Perhaps Klein’s most enduring legacy was the infrastructure deficit created by his deep budget cuts of the 1990s and his staunch opposition to debt, an infrastructure deficit with which the current government is still grappling.
Therefore it’s laudable that the current PCs have done an about-face from the position of the Klein-era Tories and are prepared to borrow so the building of much-needed roads and schools can continue.
With Alberta’s AAA credit rating, borrowing through the bond market is inexpensive for the government. Borrowing is the normal way to accomplish major investments like buying a home or expanding a business, so why shouldn’t governments make use of this financial tool? If the province can manage to borrow prudently and not get carried away (which is a big if), it will enable Alberta to cope with the influx of new residents and demands on its infrastructure as oilsands development continues to grow.
Shoring up our infrastructure will allow the private sector to pursue economic investment, which will in turn open the taps to increased revenues from royalties and taxes, both corporate and personal, allowing the government to pay off its debts. It shouldn’t be forgotten that former premier Ed Stelmach started talking about the wisdom of borrowing back in 2009, when provincial deficits first appeared on the horizon. At the time, this move was touted as “eminently sensible” by Michael Percy, then the dean of business at the University of Alberta. So, the government deserves a high five on that front.
On the other hand, something else Horner said suggests the government also deserves a slap on the wrist. As he’s previously stated, Horner reminded local business people on Wednesday that, earlier this year, he asked all government departments to find savings within their budgets, with a total target of $500 million.
He said the government is on its way to reaching this target as it develops a “results-based” budgeting process. “If you know that there’s something stupid that you’re doing, stop it now,” is what he says he said to high-level department bureaucrats.
He went on to say the government will reach its target without cutting any services and that no one will notice the difference. “We’re not going to claw back anything from anybody. We’re just going to do it better,” he said. Well that’s nice, but isn’t that what the government is supposed to be pursuing all the time? Comments like that do nothing to dispel the not-rare belief that governments are black holes for money. If they had been doing it better all along, perhaps the current fiscal crunch wouldn’t be as severe as it is.
At any rate, Horner and his colleagues are saying all the right things about changing the budgeting framework, while not putting the brakes on infrastructure development.
Borrowing for long-term infrastructure makes sense. Borrowing for operations does not. Albertans do not want to go down that path again. We must continue to live within our means.
