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No light at the end of the tunnel this time

Klein cutbacks much different from Kenney cuts
STA Jason Kenney
Alberta Premier Jason Kenney GREAT WEST NEWS/File photo

What’s all the fuss about spending cuts, a think-tank friendly to the Alberta government asked in a column that showed up in major newspaper a couple of months ago.

Last year’s budget planned for a 1.6% cut in program spending over four years and people got upset, while there seemed to be broad support when the government cut about 20% over three years in the mid-1990s.

That was a way of saying: see, it isn’t nearly as bad as you think.

In some respects, that’s true. It’s certainly true as far as the numbers go. But the numbers alone don’t influence how people perceive what’s going on.

Some observers quickly pointed out a big difference between then and now. It involved psychological preparation.

Former premier Ralph Klein and his cabinet entered 1993 putting themselves at the head of a parade that was already well underway. Alberta voters were by and large demanding spending cuts. They were also badly spooked by what seemed to be a fundamental economic upheaval; Japan seemed to be taking over the world, and the days of easy oil and gas money seemed to be over.

There was no similar urgency among voters here last year. And Premier Jason Kenney won an election with soothing talk about protecting basic services. Any tough action was going to generate a response. The government tried to cut 3% from major spending in 1987 and ran into public uproar. Six years later, people were supporting much bigger cuts because they were ready.

The handling of decisions has been different as well.

A lot of the big spending cut starting in 1993 involved scrimping on infrastructure. The province learned that was a way of postponing spending rather than eliminating it. There’s limited appetite for a repetition of that.

A nearly 23% drop in the social services budget over three years produced less pain than might have been expected because employment was improving.

And the government carefully balanced priorities. It cut health spending by 13.4% over three years starting in 1993, but cut education spending at all levels, including university, by only 6.4%. In fact, during 1993-94, total education spending went up by 3.4%.

Then there’s the difference in perceptions of the economy. Glimmers of hope had actually started appearing just in time for the 1993 election. Cattle prices improved. There were signs of a bottom and possible turnaround in natural gas.

And the government was not shy about bringing in more revenue. People were paying an 8% surtax on income tax. The general corporate tax rate was 15.5% rather than the current rate of 10%, which is scheduled to drop to 8% in 2022. Corporate income tax revenue grew by an average of more than 24% a year over the era of the big spending cuts.

Now, the government wants to accomplish most of its budget adjustment on the spending side alone. People see something missing.

So there are all sorts of differences between the mid-1990s and the early 2020s.

But the biggest may be people’s feeling about the future. The early Klein-era cuts were a brief and temporary phenomenon. They led to a huge rebound.

Starting in 1996-97, total program spending went up by 13% over three years and health spending went up by 22.6%. Spending increases kept coming. Klein’s name has become synonymous with cuts, but he actually presided over three years of austerity budgeting and a subsequent decade of big spending and big tax cuts made affordable by a natural gas boom.

Now? The government isn’t telling anyone to hang on for a couple of years and wait for things to get rosy again. It seems to be in tight-spending mode for the long haul. Spending looks to stay tight even if the population grows and the economy improves.

And the prospect of getting bailed out again by oil and gas seems slim, even if more pipelines are built. This year’s version of a famous old bumper sticker would read: “Please God, let there be another boom – even if this time it would take a really serious miracle.”

No public buy-in before the cuts began, government lack of candour, a somewhat remote premier who looks more like an absentee landlord rather than highly visible leader the way Klein was, conflict with teachers and health providers. Most of all, no light at the end of the tunnel. No wonder there’s unease.