Why Alberta Needs a Fiscal Constitution

Abstract

Alberta will enter the third decade of the 21st century with an accumulated public debt of over $70 billion and the highest per capita deficit of any Canadian province. This is a far cry from 2005, when then-premier Ralph Klein announced that Alberta was “debt free”; made the first deposit of energy revenues in the Heritage Fund in 20 years; and enacted a balanced budget law (BBL) that was intended to prevent future governments from ever running deficits again. This statutory BBL lasted only as long as oil prices remained above $100/barrel. It was amended in 2009 to allow “temporary deficits”. Since then, four premiers from two parties chose to run large budget deficits to fund large spending increases to win their next elections. Alberta’s experience proves that statutory rules are not sufficient to protect a positive fiscal legacy. Alberta’s balanced budget law, flat tax rates and protections of the Heritage Fund were all removed by simple majority votes in the Alberta legislature. Any meaningful re-instatement of these policies will require that they be put beyond the reach of future governments of whatever party – that is, that they be constitutionally entrenched. The next Alberta government could address this problem by adapting a form of the BBLs found in most state constitutions in the United States. Under Sections 43 of the Constitution Act, 1982, Alberta could proceed bilaterally by negotiating with the Federal government to “patriate” the Alberta Act from Ottawa to Alberta; and to include in this act a new super-majority amending formula such as a two-thirds approval vote in the Legislature and/or approval by way of referendum. Once the Alberta Act were “back home,” Alberta could then make further changes per its new amending formula—such as adding a BBL, a tax-and-expenditure limitation (TEL) or rules to protect the Heritage Fund. Alternatively, Alberta could proceed unilaterally under section 45 of the Constitution Act by legislating similar protections. However such unilateral action would require “symmetrical entrenchment,” meaning that any policy restrictions placed on a future government would have to be enacted under the same super-majority procedures that would be needed to repeal them in the future. Both options carry the risk that under the constitutional status quo, final interpretation and enforcement of an Alberta constitution would rest with the Supreme Court of Canada, a court with either one or no judges from Alberta. In the short term, this “made in Ottawa” risk of mis-interpretation could be minimized by ensuring that any new constitutional rules are clear, explicit and have broadly agreed-upon, objective meanings. In the medium term, Alberta could begin to recruit other provinces that have an interest in their own provincial constitutions. If such a coalition were built, it could lobby Ottawa to give provincial courts of appeal the final interpretive authority over provincial constitutions and to return the power to appoint provincial superior court judges to the provinces. This reform would remove an outdated relic of 19th century British imperial rule and give Canada what is already the norm other mature federal states. Any Quebec government would immediately support such amendments. Presumably the current conservative governments in Ontario (Ford) and Saskatchwan (Moe) would as well. A coalition with this membership would be difficult for any federal political party to ignore.