Ken Boessenkool: In defence of Jason Kenney
The easy money suggests the premier of Alberta is doomed. Don't count him out yet.
By: Ken Boessenkool
In late 1992, a former fiscally profligate mayor of Calgary who was “nominally a Liberal” went up against a fiscally tight-fisted former mayor of Edmonton who was a staple of federal Liberal leadership races. That election pitted Ralph Klein’s “massive cuts” against Lawrence Decore’s “brutal cuts” to public spending in order to balance Alberta’s massive deficits.
The former Calgary mayor won. Over his first mandate, he reduced Alberta’s program spending by more than 25 per cent in real per-person terms, an astonishing reduction by any measure. By the end of his second mandate he had eliminated the provincial debt and brought in a single-rate tax — a massive tax cut to low and modest income Alberta families.
He would win two more mandates before a lukewarm review by his own party led him to resign the premiership, although he remained popular with Albertans at large.
Let’s skip ahead. In mid 2019, a former federal politician who had started his political career as a Liberal staffer became premier of Alberta. He styled himself as a modern Ralph Klein promising to restore Alberta to the glory days of the late 1990s.
It has not gone well. After a disastrous COVID pandemic, and a series of economic setbacks including the cancellation of the Keystone XL pipeline and the termination of a major oil-sands project, Jason Kenney’s approval ratings have sagged to stomach-churning lows. The premier has survived several caucus revolts, but seems vulnerable to a leadership review this spring. In short, the easy money suggests that Jason Kenney is doomed.
But are those fortunes about to change?
Alberta is going into provincial budget season and is about to learn some surprising things.
First, the Alberta economy is on track for a banner year, second in growth only to our neighbour, Saskatchewan. Sure, we’ve got to get past Omicron, but Alberta looks poised to return to pre-COVID growth rates very quickly.
It’s not all down to rising commodity prices, though that is undoubtedly playing a role. Oil prices, for example, have been on a rocket launch since the doldrums of mid-2000 when it bounced around $22 a barrel. Today we’re recording close to $90 a barrel. Those are prices we haven’t seen since 2014.
None of this economic heat and light can be attributed to the premier — though he will certainly enjoy the resulting glow. Politicians are very adept at blaming bad economic news on others and taking credit for good economic news to themselves.
And after the rough ride Kenney has had, who can blame him?
This good economic news will be a boon for the upcoming Alberta budget. That is particularly true of the impact of rising oil prices. As Alberta fiscal genius Trevor Tombe has pointed out, oil prices are now above the level that Alberta needs to balance its budget … by next year.
And it’s not just the rise in prices that Kenney has to thank. Alberta is benefitting from higher volumes too. Billions of dollars invested in oil-sands projects over the past decade is tapering off, but that means those oil sands are coming on line and we are shipping more oil. Alberta is jamming bitumen onto rail cars and pipelines at ever-growing rates.
And while he may not want to admit this, Kenney should also thank Rachel Notley. Her royalty review left oil-sands royalties alone when the price of oil was low. But Notley tweaked provincial royalties so that at higher oil prices, the Alberta government would get a greater share.
It’s a triple whammy win for Kenney. Winning on price. Winning on volume. Winning on, er, Notley’s tweaks.
Again, Kenney can’t claim any strategic brilliance beyond being in the right place at the right time for any of this. Though he certainly is entitled to try.
Rather — and I’m sorry to take so long to get to my point — there is something remarkable going on behind all of this which is entirely Kenney’s doing. And for which he deserves all the credit.
And it has to do with provincial program spending.
After Ralph Klein cut spending so dramatically in the 1990s, he started to let spending rise in line with natural resource revenues. His successor made things worse, and soon Alberta was spending 40 per cent more per person than Ontario and a quarter more than B.C. to deliver the same basket of government services. The budget eventually got so badly out of hand that Alberta blew a multi-billion dollar Heritage Fund rather than address the spending problem.
It wasn’t uncommon in the previous decade for spending to grow by eight per cent or more per year. It wasn’t until the NDP came to power in 2015 that Alberta saw a modicum of spending restraint. In the second half of her term, Notley wrestled annual spending increases down to half that amount — just over four per cent annually. That’s right. Notley was Alberta’s most fiscally conservative premier in at least a decade.
Under Kenney, program spending has stopped in its tracks. In fact, it’s better than that. Kenney is on track to reduce annual program spending in Alberta by just over $650 million by the end of his term. If you convert that to real spending per person, Kenney is on track to reduce spending in Alberta by 15 per cent per person.
Now some quick caveats. Alberta is tracking its COVID expenditures outside of regular program spending and so those numbers assume that COVID spending will, in fact, stop when the pandemic is over. On the other hand, those numbers include Kenney’s projections for program spending, which could come in lower (of course, they could come in higher too).
But one thing is sure. The Alberta budget coming out in a month or so will contain some solidly good news for Jason Kenney and the province. He is on track to not just balance the budget, but run surpluses by next year — an election year. And while much of that isn’t his doing, some of it clearly is.
All of this is very good news for Kenney’s leadership review, due following budget season. Kenney must surely hope that, unlike Ralph Klein, he has a better showing among his party than he currently has among the public.
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