To ensure its future prosperity, Alberta must implement deep spending cuts. Enough with the quick fixes
With Albertans grappling with higher prices for housing, food, and other essentials, it is encouraging to hear Premier Danielle Smith talk about a $1.4 billion middle-class tax cut in the near future. However, to ensure the tax cut is permanent, effective and sustained, the Alberta government must implement robust systems to control its high spending.
In fact, I have estimated that the Alberta government will need to hold year-over-year operating spending increases to about two percent over the long term to fulfill the tax cut and a $250 to $400 billion Heritage Fund build-up.
At the risk of sounding like a broken record, the Alberta government has been unable to get its spending under control for over 25 years. While operating spending increases for 2025-26 and 2026-27, in Budget 2024, are projected at 2.4 percent and two percent, respectively, since 2021-22, the Alberta government has consistently exceeded initial spending projections (net of COVID-19 spending), mainly because of the presence of windfall resource revenues.
In 2021-22, operating spending was initially projected to increase by 1.1 percent, but actual operating spending increased by 6.2 percent. In 2022-23, operating spending was initially projected to decrease by 0.2 percent, but actual operating spending increased by 10.5 percent. In 2023-24, operating spending was initially projected to increase by 2.8 percent, but actual operating spending increased by 6.2 percent. And, in 2024-25, operating spending was initially projected to increase by 1.7 percent, but now is projected to increase by 3.9 percent.
The Premier has stated that significant efforts will be made in the fall of 2024 to reduce wasteful spending in order to deliver a middle-class tax cut. However, the Alberta government lacks a strong culture of conducting spending reviews, which is necessary to make this commitment a reality. Although Alberta has reviewed some of its programs and services over the years, these efforts have been fragmented, reactive to crises, and limited in scope. There has been a lack of strong political leadership, and implementation has been inconsistent. Monitoring has also been inadequate. While small changes can lead to small savings, achieving sustainable savings requires a fundamental transformation in government operations.
Over the past two decades, I have been reviewing “best practices” in program and service transformation. In the spring of 2019, I wrote a recommendation for the United Conservative Party (UCP) Election Platform to “formalize an annual spending review process within the budget and fiscal planning process to eliminate waste, duplication, and non-essential spending and create the fiscal space to fund government priorities.” Later, in the summer of 2019, I helped members of the MacKinnon Panel on Alberta’s Finances develop a recommendation that “government undertake a comprehensive approach to a program review, including all departments, agencies, boards, commissions, and the wider public sector. This should provide a principled and thoughtful cross-government approach to looking at the effectiveness and efficiency of government service delivery in the public interest.”
Unfortunately, the most recent broad attempt at a program review, initiated by the Kenney government in 2019, seems to have “stalled out” after Budget 2020. This was due to the onset of COVID-19 and then rising oil prices, which significantly boosted government revenues. Historically, efforts to conduct comprehensive reviews of programs and services tend to fade when Alberta’s fiscal situation improves.
Although some work may have been done to review government programs and services during 2021 and 2022, the Alberta government has not made the results of these reviews public. Nor have we heard anything more publicly regarding progress on the Alberta program review since Budget 2020.
The fact is that Alberta continues to be a relatively high-spending province with middle-of-the-road outcomes. As the Alberta government faces the challenge of achieving long-term fiscal sustainability, the current approach of high spending with mediocre outcomes is no longer acceptable. The less-than-ideal outcomes in delivering programs and services can be linked to how the Alberta government makes its spending decisions, including:
- Ministries often make decisions on poor or incomplete cost information, leading to poor value for money and program and service failure;
- Making decisions without understanding unintended consequences, particularly if these fall in another area of government or sometimes beyond the immediate future; and
- Having no adequate mechanism for centralized challenge and action or learning from “best practice.”
Albertans have a right to expect that spending decisions are based on robust, evidence-based data. Many of the issues the Alberta government is trying to tackle today cut across traditional ministry and agency boundaries and require innovative responses and “outside-the-box” thinking. Transformational change, not incremental change, is needed to transform the Alberta government into one that is more responsive to its citizens and meets the challenges and opportunities of the future.
Fundamental change, transformation and long-term sustainability in government programs and services require looking beyond “quick fixes”. The Alberta government should encourage and build systems and processes that encourage innovation, good ideas, and better program and service outcomes. Putting all provincial programs and services under a permanent program and service transformation lens will ensure that they are more responsive to the needs of Albertans. A robust program and service transformation framework will establish a better alignment between financial resources and desired outcomes, a key instrument for making government more outcome-based.
In this spirit, my five key recommendations for establishing a robust Alberta program and service transformation framework are as follows:
- The Government of Alberta should incorporate a formal annual program and service transformation framework within its budget and fiscal planning processes to eliminate waste, duplication and non-essential spending.
- The requirement for program and service transformation should be made a permanent part of Alberta’s financial planning by including it in the province’s fiscal laws. This would ensure that it remains a key aspect of the budget and financial planning process.
- The transformation of programs and services should be overseen by a special Cabinet sub-committee called the Cabinet Committee on Program and Service Transformation (CCPST). This committee would be led by the President of the Treasury Board and Minister of Finance. There should also be a Deputy Minister’s Program and Service Transformation Committee (DMPSTC) to support the CCPST.
- A permanent Program and Service Transformation Secretariat (PSTS) should be created to analyze and evaluate government programs and services, ensuring their effectiveness and efficiency across all government areas.
- Program and service transformation should incorporate performance information to improve program effectiveness and efficiency while keeping costs under control and maintaining fiscal discipline. This involves assessing the savings gained by finding more cost-effective ways to deliver the same quality and quantity of services and evaluating how different levels of funding impact program results and outcomes.
If the Smith government wants to address its high spending, it needs to go beyond making small cuts and start asking the tough questions: What are the government’s strengths, and where should it step back and allow others to take the lead? Should the government be involved in this area? What results is it actually achieving? Are there more effective ways to accomplish these goals? What alternative models or approaches could the government consider using?
A permanent, legislated program and service transformation framework is necessary to address these critical questions and provide clear, actionable answers. I urge Alberta to adopt this framework to ensure the success of its $1.4 billion middle-class tax cut and to build a Heritage Savings Trust Fund valued at $250 to $400 billion.
Lennie Kaplan is a former senior manager in the Fiscal and Economic Policy Division of Alberta’s Ministry of Treasury Board and Finance (TB&F). During his tenure, he focused on best practices in program and service transformation. In 2012, he was awarded the Corporate Values Award in TB&F for his contributions to Alberta’s Fiscal Framework Review. In 2019, Mr. Kaplan served as Executive Director for the MacKinnon Report on Alberta’s Finances. He retired from his role as Executive Director of Research at the Canadian Energy Centre in October 2023.
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I strongly disagree with the idea that spending cuts are effective. I’m 54 years old and have been paying my own bills since I was 17. Over the years, I’ve noticed that while some costs may occasionally go up or down, the overall trend is that things become more expensive every year. Even though I live a relatively minimalist lifestyle, I find that every year I accumulate more stuff, which in turn costs more to maintain.
Cutting spending doesn’t solve the problem. If you have things you need, you have to spend what it costs to maintain them. If you’re spending money on things you don’t need and you stop, that’s not cutting spending; that’s just eliminating unnecessary expenses.
When it comes to necessary expenses, cutting spending only creates problems down the road. Eventually, you’ll realize that you’re behind and need to spend even more to catch up, often with the added burden of interest. For example, we still haven’t fully recovered from Ralph Klein’s spending cuts. Those cuts are now costing us more because we’re trying to make up for lost ground.