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McIver vows to wean Alberta off reliance on oil and gas

Tory leadership hopeful Ric McIver offered up his own blueprint Tuesday to sock away cash for Alberta’s future, but an economist who studies provincial finances said all of the candidates’ fiscal plans face difficulties without new revenue sources.

In a speech to the Calgary Chamber of Commerce, McIver said Alberta must lessen its reliance on volatile oil and gas revenues to pay for its operations, and the government should have a goal of saving half of its non-renewable resource revenue by 2020.

“I want to make this government policy,” the Calgary-Hays MLA told reporters.

“Oil and gas revenues, while they’re very valuable to Alberta and they pay for many of the things Alberta values very much, it’s also one-time revenue . . . it’s savings.

“So, if I’m premier, I will make sure we will get to the point where we treat at least half of those as savings.”

One of McIver’s rivals in the race to become Progressive Conservative leader, Jim Prentice, unveiled his own financial plan last month to the Calgary chamber.

The former federal cabinet minister promised that half of all future provincial government surpluses would be put into a debt retirement fund, with the other half going into the Alberta Heritage and Savings Trust Fund.

Both Prentice and McIver — along with the third Tory leadership contender, Thomas Lukaszuk — have said they will not introduce a sales tax or make changes to Alberta’s flat tax on personal income or its energy royalty rates.

The province’s current savings plan, which kicks in officially in 2015, calls for five per cent of the first $10 billion in resource revenue to go into the province’s Contingency Account.

This year’s budget saw the government project $9.2 billion in non-renewable resource revenue. If McIver’s plan was in effect this year, it would mean $4.5 billion would be taken out of general spending — the province plans on spending about $40 billion — and directed into a savings account.

University of Calgary economics professor Ron Kneebone said the Tory government has been grappling with the issue of saving money for years, with numerous plans enacted and dropped.

He said saving resource revenue is a good idea, but diverting half the amount from spending would have significant consequences while still leaving major volatility in government finances.

“The implications are ugly,” said Kneebone.

“You’re going to have dramatic cuts in spending unless you get realistic and also add some revenue to it . . . either increase the personal income tax rate from 10 per cent to something higher or, better of all, introduce a consumption tax.”

Kneebone said Prentice’s savings plan also leaves the government dependent on roller-coaster resource revenues.

Lukaszuk — who has not yet released his financial platform — said in an interview Tuesday the government has to focus on economic diversification beyond resource extraction to enhance its revenues.

The former deputy premier said he would only consider raising the issue of new taxes with Albertans if he was convinced the government was spending all its revenue “as efficiently as it possibly can be.”

“I would be the first one to tell you I couldn’t do that right now,” said Lukaszuk, calling for a renewed effort to find efficiencies.

McIver also promised Tuesday to take a closer look at the government’s operational expenses, saying that “if Alberta is spending more than we need to, I will cut back.”

McIver, Prentice and Lukaszuk have all endorsed using debt to pay for needed capital projects, with McIver saying Tuesday that borrowing should be linked to specific projects, with a fixed repayment schedule.

The government must also demonstrate that its debt-to-GDP ratio will decline within a three-to-five year planning horizon, McIver said, adding the government must do a better job explaining its borrowing policy.

“When I talk about these things I use smaller words. Because you know what, I’m not smarter than other Albertans and I don’t want to present myself as being (so). And I want Albertans to be comfortable with what we’re saying,” said McIver.

McIver vows to wean Alberta off reliance on oil and gas