Assuring Alberta's prosperity

If Albertans employed in the energy sector ever wonder why some people underestimate the vast contributions made by the oil and gas industry to Alberta's prosperity, a new ad from the Alberta Federation of Labour provides a clue.

In a recent newsletter sent to Alberta's nurses, the province's umbrella organization for unions published a one-page ad that portrays a balding energy company executive sitting at a hefty desk with his large whisky carafe beside him. The Dickens-like figure intones, "Your provincial government would rather underfund its own education and health-care systems than charge me and my energy company an extra penny in taxes or royalties."

The ad and its accompanying website are a mishmash of error-prone assertions. Here's one in particular: "Albertans are being forced to give up the basics." Health care and education are mentioned as specifically underfunded.

Time for a fact check: On health care, in 2011, Alberta's public expenditures amounted to $4,528 per capita, second only to Newfoundland at $5,077. The national average last year was $3,778.

However, adjusted for age and sex (useful given that people at different life stages use the health-care system less or more), Alberta spent more than any other province, at $4,408 per capita; that compares to Newfoundland at $4,273 and a national average of $3,526. (In this latter measurement, I've used 2009 figures as that's the latest year available from the Canadian Institute for Health Information on this comparison.)

On education, let's compare consolidated provincial and municipal government spending on education, which allows for apple-toapple comparisons.

Alberta, on a per-capita basis, spent above the national average on education between 1998 until at least 2008, and perhaps beyond that year as well. (The information cited next is from Statistics Canada and the agency discontinued its comparisons after 2008.)

To add some eagle-eye clarity on overall Alberta program spending, here are the numbers: Measured per capita and accounting for inflation, such spending hit a high of $11,781 per person in fiscal 1986, dropped in the mid-1990s to as low as $6,959, and rose again to $10,489 by 2009 (all figures in 2011 dollars and adjusted for inflation). Budget 2012 estimates per capita program spending will be about $10,300 this year, so historically, the provincial government is at the high end of such spending patterns.

Those are the facts. Critically, they don't even address the question of whether Albertans are getting the best bang for their buck from their tax dollars. (That's another column.)

Despite Alberta's penchant for high per capita spending, the AFL wants significantly higher taxes and royalties. It mentions how $11 billion could be raised before Alberta's tax rates exceed that of the next lowest taxed province, British Columbia.

Problem: That estimate doesn't take into account that it is precisely Alberta's moderate tax levels and reasonable royalty rates that, in part, foster this province's job creation dynamo. It is partly why, for example, compared to June 2009 (the last month of Canada's recession) and February this year, Alberta now has 144,000 more full-time jobs. Alberta thus accounts for 28 per cent of the half million new full-time jobs created since mid-2009 across Canada, even though Alberta has just 11 per cent of the country's population.

For the record, it's not that royalty rates can never be reconsidered. Royalties are rents and owners of buildings, property or resources are entitled to charge whatever they want - but those who get greedy will kill the golden goose. It's why landlords who charge too-high rents will find themselves without tenants. The same applies to too-high royalties on oil and gas extraction.

This is a lesson everyone should have learned after Ed Stelmach's disastrous "fair share" increases on the energy sector. Stelmach's increases were reversed precisely because they made some oil and gas exploration uneconomic and killed jobs.

As for higher taxes, for decades, taxes in Alberta went just one way: up. It was not until some reductions were made in the late 1990s that Albertans finally saw some relief. It would be a mistake to reverse that, especially as it's long overdue to examine public sector wages, benefits and pensions to bring them in line with the private sector. That action is how the government should balance its books, not through counter-productive job-killing increases to royalty and tax rates.

Ironically, the Alberta Federation of Labour's call for higher taxes and royalties, if ever enacted, would kill off some of the jobs created over the past two years, including those performed by some of its own private sector members.

Calgary Herald, Sun Mar 25 2012
Byline: Mark Milke (Fraser Institute/Director of Alberta Prosperity Initiative)

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