Shifting Priorities: From Deficit Spending to Paying down the Debt and Lowering Taxes - Evidence from the Alberta Advantage Surveys: 1995-2000

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The First Klein Government and the New Fiscal Strategy

When Alberta Treasurer, Jim Dinning, tabled his first budget, on 6 May 1993, three things were clear. First, the new political agenda would be based on fiscal responsibility; second, it would differentiate the Klein government from its high-spending predecessors; and third, it would constitute a major part of the Tory election platform. Even though it was a strategic initiative, it was unusual in the sense that, unlike other pre-election budgets, which try to influence voters with lavish expenditures of taxpayers’ money, this one clearly did not.

Dinning’s budget promised to do four things. Step one was to reduce program spending by 20%, and legislate an enforceable plan to balance the budget by 1996-97.¹ Health, education and social services account for some 70% of all program expenditures, which meant they would necessarily be the prime targets. Revenue estimates, especially royalty revenue from petroleum resources, would be conservative and no new taxes would be introduced.

Step two would be to set and stick to a clear set of priorities, along with "benchmarks" and a system of business plans for all ministries and agencies in order to provide a metric for appraising performance.

Step three was to develop an economic strategy that would be based on the principle that province-wide wealth-creation would be enhanced by providing an economic environment attractive to private investment and a free market, chiefly by streamlining regulations, by deregulation, and by creating a smaller government.

Step four, Dinning promised to change the way government did business by increasing the two-way communication between the government and citizens, eliminating duplication and waste, improving cost-effectiveness through audits based on the new business plans, privatization, and by introducing incentives for improvements in civil service productivity.

Many of these policy proposals were statements of intent rather than detailed action plans, but all of them moved in the direction of reducing the size of government. Klein began at the top, by reducing the size of cabinet. He replaced 26 permanent cabinet and caucus committees with five policy committees. This triggered a program of amalgamating, restructuring, and eliminating government departments, boards, crown corporations, committees and councils. In response to the 1993 recommendations of the Financial Review Commission (FRC), chaired by the former President and CEO of TransAlta Utilities, Marshall Williams, and to recommendations from the provincial Auditor General, new and more accurate accounting practices were also adopted. For the first time unfunded pension liabilities were considered to be part of the consolidated debt of the province. The book value of the Lloydminster heavy oil upgrader, a former "mega-project," was written down, and program guarantees, crop insurance, loans, vacation pay, long-term disability, and crown corporations liabilities were included on the basis of more conservative accounting principles than before. The eventual result, as had been estimated by the FRC, was to double the book value of the provincial debt (Mansell, 1997, 16-73). But now at least the books were accurate.

While the spring 1993 budget debate took place on centre stage, backstage an even more intense debate was taking place within the Tory caucus between many of the veterans from the days of Premiers Getty and Lougheed who would not be running again, and the new Klein team who clearly wished to keep their jobs. The issue between the two factions was the "gold-plated pensions" that the retiring MLAs were to receive—in some cases over $80,000 a year. Over the strenuous objections of retiring MLAs, Premier Klein changed the pension benefits. As Kenneth Whyte said, the pension changes made it look as though he had "run up against a bunch of Tory politicians found fattening themselves at taxpayers’ expense and he’d made them bleed on their way out the door. He’d made voters forget that he himself was a Tory and a politician" (White, 1994, 50). He had also succeeded in out-flanking the Liberals.

The ensuing election campaign confirmed the Klein-Dinning fiscal agenda. Fully 85% of the votes cast went to parties favouring a balanced budget with no new taxes, and 100% of the elected Members ran on essentially the same platform. Decore’s Edmonton-based Liberals, however, were badly outclassed in political skill and experience. For the first time since 1921, Decore had a real chance to restore the Liberals to power. Instead, by a series of campaign errors, starting with self-righteous comments on the divisive issue of abortion, Decore seemed not to realize that his opponent was no longer the party of Don Getty. For their part, the NDP was out of the picture from the beginning of the campaign. They were temporarily extinguished by the results, but once again took pride in claiming a moral victory.

Eight minutes after the polls closed it was clear that Ralph Klein’s Tories had won. They had elected 51 members, down 5, with 45% of the popular vote. The strategy of distancing the Klein Conservatives from their predecessors had worked, but it remained very much an open question, especially among pundits, how long he would last. Political scientist Allan Tupper, of the University of Alberta, in Edmonton, was simply stating what "everyone knew" when he observed on election night that the Premier’s views on balancing the budget without raising taxes were "almost utopian" (Maclean’s 28 June, 1993). Klein disagreed, though he kept his own counsel for several months (Alberta Report, [AR] 20 December, 1993).

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