Braid: Toews wants a budget law politicians can never break

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“One hundred days in jail.” That should be the penalty for a politician who breaks a proposed, new balanced-budget law, Finance Minister Travis Toews said Tuesday.

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He was joking, of course. Just imagine politicians putting themselves in jail.

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But Toews wasn’t kidding when he proposed the law, and noted that breaking it would be “a huge embarrassment,” so serious that no government would dare do it.

However, breaking a balanced-budget law hasn’t bothered the government yet. When the need to win an election meets a deficit, spending wins every time.

The previous Alberta PC government enacted a tough balanced-budget act after then-premier Ralph Klein eliminated provincial debt in 2004.

One of the most famous photos in Alberta politics shows Klein holding up a “Paid in Full” sign after years of deep spending cuts produced surpluses that were used to eliminate debt.

But soon enough, the deficits were back. Klein’s successors abandoned the balanced law and the companion rule against incurring debt.

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“True to his word, Klein did enact balanced-budget legislation,” former finance minister Ted Morton wrote for the Herald. “But within four years, the law prohibiting deficit was repeated.

“Alberta’s experience proves that statutory rules are not sufficient to protect a positive fiscal legacy,” he continued. “Alberta’s balanced-budget law was removed by a simple majority vote in the legislature.”

Morton said balanced budgets should be entrenched in the Constitution. (As if.) He was certainly right about the eternal political dynamic.

By my count, Alberta has run 20 surpluses since 1978-79. (The year I covered my first Alberta budget, unaware that it was a life sentence.)

There have been 24 deficits since. More deficits than surpluses, in other words.

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In good years, spending pops right up to close the gap with revenue.

In 2008, then-premier Ed Stelmach was tempted by the false god of high oil prices. When oil hit an all-time peak of $147 a barrel, he announced $4 billion in new spending for carbon capture and green transit.

Prices quickly fell below $50. The world financial crisis struck. Alberta’s budget was in chaos. A $4-billion surplus dived into deficits for years thereafter.

For a time, the PCs managed to juggle this without resorting to loans, or at least none of them acknowledged.

But in November 2012 there was an awkward moment at an Edmonton news conference, when then-premier Alison Redford and her finance minister, Doug Horner, hinted that they were borrowing money for infrastructure.

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They squirmed at the podium when sharp-eyed Keith Gerein, the Edmonton Journal columnist, figured out what they were really saying.

Soon enough, the details emerged. Horner claimed the borrowed money would allow them to keep building while holding the operating budget in balance.

The next year, the deficit was almost $3 billion.

Toews, rather like Morton, is a thoughtful fiscal conservative who routinely bucks the instinctive big spenders in government.

He wants to build a stable system. He recognizes, with this balanced law idea, that exceptions would be allowed in sudden hard times.

By giving some flexibility to the law, he hopes it won’t be resisted or simply ignored. Spending rules would survive to right the balance again.

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Toews’ budget is a classic good-times effort. It spends big on crucial services, especially health care, with a nearly $1-billion boost in operating funds. The surplus is used for essential repairs to pandemic wreckage.

Because of that reasonable approach, the surplus is “down” to $2.3 billion. Spending is $68 billion. Just five years ago, it was $47 billion.

When I covered that long-ago budget launch in 1978, spending was $3.7 billion. The surplus was $1.2 billion — a stupendous splash in a much smaller fiscal pond.

The very next year spending rose to $5.7 billion and there was a deficit. That’s where all the trouble started.

Toews’ idea has merit, but jail terms might be the only way to make it work.

Don Braid’s column appears regularly in the Herald

Twitter: @DonBraid

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