the top story of Alberta this decade: the "Fiscal Responsibility Act"

Daveberta is asking what "exciting" event from this first decade of the 21st century might be talked about in Alberta history books 30 years from now. In my view the top story, or more accurately the low point, of the province these past 10 years has been the sorry saga of the mis-named Fiscal Responsibility Act. I'll grant that this particular tale does not come with any exciting moments. If it did, perhaps government fiscal policy, or more precisely the lack thereof, might have captured the interest of the public such that, if the story had occured at all, it would have had a happier ending.

Section 2 of the Fiscal Responsibility Act declared that there would be "no deficits" in Alberta. It also came to require that at least SOME natural resource-related revenue be saved over the course of a cycle. But the provisions of the statute were ultimately ignored every time they actually threatened to constrain government spending. In March 2004, the P"C" government of Alberta amended the Act to raise the point after which resource revenues had to be diverted to the Sustainability Fund from an already high $3.5 billion to $4 billion. It was neither the first nor the last time that the province's financial assets got the short stick. In May of 2005 the constraint was lifted from $4 billion to $4.75 billion, and in May of 2006 up to $5.3 billion.

Colin Busby, an Albertan and a policy analyst at the CD Howe Institute, noted in May of 2008 that Alberta needed "aggressive savings targets" and that “[f]ailure to meet this target will lead to a permanent decline in fiscal capacity this century,” without addressing the fact that the Alberta government had repeatedly proved an unwillngess to abide by even mild savings targets.

In 2009 the charade finally came to something of an end and the Fiscal Responsibility Act was repealed. The Act's flagship clause had specified that "actual expense for a fiscal year shall not exceed actual revenue for that year." While the continual amendments had already made a mockery of the legislation, the government realized that amending the flagship clause to add "plus any amounts allocated from" savings funds would gut the law so blatantly that any further legislation on the point had better be delivered in an entirely new package. Thus was the "Fiscal Responsibility Act, S.A. 2009" born. Dave Hancock said the 2009 moves provided "for a more flexible fiscal framework" without explaining why the old Act was introduced in the first place if "flexibility" is a goal.

The moral of this story is not, or not just, related to the observation of the Director of the U of Alberta Institute of Public Economics that "[h]ad this savings/expenditure constraint remained in place, Alberta's expenditure levels would be about $28 billion annually - not $36 billion currently." It's that Albertans tolerated symbolism over substance for years, either out of a populist predilection to take umbrage only at visceral concerns or out of a lack of enthusiasm for political engagment. Instead of behaving as a trustee or agent of Albertans, the government dealt with savings funds that could have monetized the province's natural resource wealth for the benefit of future generations as if it were the owner.

During his tenure as Liberal leader, Kevin Taft noted the refusal of the P"C" government to "rein in their massive spending" and described them as, in fact, "addicted to spending." "The Tories in Alberta are spending 23 per cent more than the average of other provinces," observed the Liberal. In January of 2008, NDP MLA Ray Martin said, "with all the spending they've been doing, I don't think the budget is going to be pretty." Less than two months later Martin was voted out of the legislature in favour of a PC candidate.