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The Alberta Disadvantage

In Governor Mead’s 2015 supplemental budget, the governor called on the legislature to set up a reserve account for an industrial park, and the legislature complied with a $5 million appropriation. The idea comes from the Industrial Heartland in Alberta, Canada, an industrial park funded by the provincial and various local governments to attract oil and gas companies to the province. Although the governor has waxed eloquent on the Alberta government’s use of tax dollars to attract value-added oil and gas activity to the province to create jobs, the Industrial Heartland is but one example of a project financed by a government that lost its way, and has now paid the price at the polls.

Alberta’s economy is very similar to that of Wyoming, and so is its government. Government spending soars when oil prices are high and government policy fumbles with pseudo-solutions or worse, threatens tax hikes when oil prices are low. One scheme designed to help government appear to be solving problems is economic development. But when government talks about economic development, it isn’t talking about getting out of the way so the private sector can compete more effectively, it is talking about picking winners for special, taxpayer-funded handouts. Both the Wyoming and Alberta governments fund economic development schemes, but as shown in the recent Alberta election, handing out tax dollars to private companies can’t save a government that has lost its way.

If Governor Mead wants to use Alberta as an example, perhaps instead of copying the failed policies of a floundering government, he should look at the policies of a previous Alberta premier.

In 1992, after the oil and gas price declines of the late 1980’s, Albertan’s elected Ralph Klein as Premier. Premier Klein promised to eliminate deficit spending and the provincial debt with spending cuts, not tax increases. Klein cut spending by 20 percent over four years, reduced government employment by 20 percent and cut bureaucrat salaries by five percent. Between 1995 and 2005, the provincial debt fell from $22.7 billion to zero. By privatizing government services and ending handouts to business, Premier Klein increased per capital income and was re-elected in 1997 with 51 percent of the popular vote and again in 2001, with 62 percent of the popular vote, gaining 74 of the 83 seats in government, an overwhelming majority.

Alberta experienced, as did Wyoming, the huge oil and gas boom of the last decade. In a story similar to that of Wyoming, government spending exploded out of control, tripling between 1999 and 2009, from $13.4 billion to $36.2 billion (all figures in Canadian dollars). By 2013, the deficit sat at about $5.3 billion and province was once again a debtor, holding almost $9 billion in debt.

The Alberta government, like the Wyoming government, has a spending problem. Making long-term spending commitments based on revenue from a cyclical industry such as the minerals industry has inevitable consequences now experienced both in Alberta and Wyoming. As the minerals revenue used to fund the growth of government disappears, government scrambles to find new sources of revenue to maintain its unsustainable level of spending. During the recent Alberta election campaign, when the still-Premier of Alberta, Jim Prentice chastised Alberta citizens saying they needed to “look in the mirror” to see why he needed to hike taxes, they did.

Albertans recognized that they were the ones who voted for this conservative-in-name-only government, the government that instituted the policies that blew mineral tax revenue out the door and led to the panic tax increases promised in the next budget. This conservative-in-name-only government no longer rules the province—Alberta’s voters tossed them out and elected the socialist NDP party for the first time ever.

Let’s face it. There just aren’t enough citizens in either Wyoming or Alberta to maintain a level of government spending based on here today, gone tomorrow minerals tax windfalls. If the Wyoming government continues with failed spending policies, it might want to look in the mirror before it goes the way of the Alberta government.

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