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Good evening. Thank you for joining me this evening from Government House.
As your Premier, I feel that I can only ask to speak to Alberta when there is something essential – something important to say. And today, in Alberta, we face that circumstance.
We are at a turning point in our province, and in the coming days we will be announcing some critical changes to how we manage the finances of our province.
And about the kind of province that we are building for our children and for our grandchildren.
Albertans know what has happened to oil prices – they plunged by more than 50% in just a few months.
You’ve also heard how this can affect our budget, with a revenue shortfall this coming year that would exceed $7 billion, a critical issue if we don’t act.
So there are some tough decisions to make – and to protect Alberta in the long run. As your Premier, I have heard Albertans say that you expect leadership in making those decisions.
I also know you do not want me to be impulsive. You want thoughtful decisions for the future.
I share your belief that our decisions need to be measured and fair. Albertans tell me that they want to see balance.
Balance because of course, we must balance future budgets, no matter what the price of oil is.
But there are other balances to strike also – so that we protect and look after the most vulnerable amongst us – and we don’t undo some of the extraordinary things that we have accomplished in Alberta – that we invigorate our entrepreneurial potential – yet still have a strong conservation ethic.
In the next few minutes, I will outline what I propose for Alberta – both for the coming months and looking ahead to the future that we will create for our children and grandchildren.
Now, you may know that the past year’s budget doesn’t look too bad because until last fall we still had oil prices averaging over $100 a barrel. Today they are at $43.
If we were to maintain our current fiscal structure, our revenue gap next year could be at least $7 billion – that’s $1750 for every man, woman and child this year.
If we kept to the current course, our revenue shortfall would total more than $20 billion over the next three years and that is simply not sustainable.
It’s no different from how every one of us looks at our own personal or family budgets. We know what happens if we let our finances get out of hand.
So it is fair to ask, how on earth did we get here? There are many factors but if there is one underlying reason, I would say that for too many years, our budgeting has been speculative.
And I use the term speculative – because in essence, we have built our budgets around energy revenues and oil prices.
And we have no control over world oil prices.
But we can budget around assured revenue sources if we separate out our energy revenues.
So what would this mean in Alberta? If we take out revenues from energy, we see two things:
Our government expenses have risen dramatically over the past 10 years.
If we take out revenues from energy, government revenues come nowhere near our spending. In reality, we hid from difficult decisions and we used our children’s inheritance to pay for it.
Why did this happen in Alberta?
Fundamentally, we’ve not always had realistic expectations and our leaders must bear a considerable part of the responsibility for that.
There have been premiers who took some of the right steps – in the case of Premier Lougheed – setting about to diversify our economy, and putting us on course to save more dollars – and in the case of Premier Klein – introducing greater fiscal rigour.
But we did not sustain those intentions. We became complacent. And that is something we need to put right once and for all.
Now, we need to address the current fiscal challenge in short order, and I will speak specifically about the 2015 budget.
I also want to talk about the longer term. This may feel less urgent but, in fact, it is essential.
It is no longer good enough that we go from boom to bust budgets and come up with another set of patchwork solutions.
That is why tonight I am proposing a 10 year plan for Alberta. This plan will be introduced with the budget
The plan will have three fundamental pillars:
- a strong fiscal foundation
- building a lasting legacy
- and securing Alberta’s future.
A strong fiscal foundation starts with a balanced budget.
We also need to ensure that we receive the best value from our taxes. And one of the ironies in Alberta is that we have among the most expensive public services in Canada, yet we pay the lowest taxes.
And not all the services are meeting the expectations of Albertans. I have heard your concerns and they are real. You are right when you say that improvement must go hand in hand with efficiency. That we should provide better care for our seniors and enough schools for our children.
There’s another key factor when we look at value. Compared to the Canadian average, Alberta spends approximately $1,300 more per capita on programs and services, and more than half of these costs are from salaries alone.
Salaries are a major cost driver. $2.6 billion in salary increases will kick in over the next three years without any action.
We will honour contracts for our employees. But as contracts expire, we need to seriously examine how we structure those contracts. And the problem isn’t always salary-based, sometimes it’s how jobs are managed.
And I want to speak for a moment to all of the men and women who serve Albertans in public service.
You know, just as I know I would have never achieved my goals if I had not been inspired by some of my first teachers in Grande Cache, I know Albertans value your professionalism and your service.
We’re now asking for your openness to new solutions. We can truly use your help in resolving Alberta’s fiscal challenges. Together, we can build the best performing public service, not necessarily the most expensive one.
As the bargaining process unfolds, you will be treated with respect and engaged as valued partners to ensure that we can achieve this together.
Your government will be organized, it will be resolved and it will be ready to work with you.
And lastly, when it comes to our fiscal foundation, we need to look at the revenue side of the equation – this is not just about cuts – it’s also ensuring that the revenues for our health care and education, and other essential services, are not hostage to oil and gas prices.
The second pillar in our 10 year plan is the legacy we leave for Alberta.
Energy revenues are a unique benefit we have in Alberta and we should treat them as a legacy rather than becoming addicted to them as operational dollars.
Beginning in 2018-2019, the percentage of energy revenues going to program spending will decrease to 75%.
In the next year, by 2019-2020, only 50% of energy revenues will be used for program spending.
25% of our energy revenues will be dedicated to rebuilding our emergency fund and paying down debt. Because we know emergencies like fires and floods can happen and we must be able to respond quickly.
And paying off our debts is simply something we must do. Otherwise, we sap our capacity and our flexibility in the long run.
The other part of the legacy I want to talk about is saving for the future and diversifying our economy through the Heritage Fund, created by Peter Lougheed in 1976.
It was an innovative concept, one that remains unique in Canada. It was intended to safeguard Alberta’s future, and I am determined that we will restore the Heritage Fund as a priority for Alberta.
As the energy revenues going into general revenue are decreased by 2019-2020, 25% of energy revenues will be saved and invested back into the Fund and used to diversify our economic strength and to strengthen our legacy to our children and our grandchildren.
Over time, as our contingency fund is replenished and our debt is paid off, an even greater share of energy revenues – 50% – will go to the Heritage Fund.
I truly believe that one of the great mistakes we have made has been to let our commitment to the Heritage Fund lapse, and that is something I will change.
The third pillar of our 10 year plan is to secure Alberta’s future.
There was a time in the past, when Alberta used its resource wealth to make investments in our future.
We invested in medical research that changed the world. We invested in new industries, like petrochemicals, which contributed to jobs in our province. We invested in parks, and museums and cultural facilities that shared the Alberta story with visitors from all over the world.
In very tangible ways, these investments turned resource wealth into a lasting legacy for Albertans. We must do more of this.
We can be environmental leaders, especially in the areas of climate change and environmental conservation.
We can build on our economic strengths not just in energy but also in agriculture and forestry while confidently reaching into new markets.
And we can transform our province’s relationship with Aboriginal peoples.
We can care for Albertans as they age.
And we can invest in education that equips our children for full and successful lives.
Up to now, I’ve placed a great deal of emphasis on the longer term – what we can do for Alberta over the next decade.
But we also have immediate decisions to make. This week, Alberta’s Minister of Finance will table a budget which will have an impact on every Albertan.
I can’t pre-empt the budget and what will happen in the Legislature, but I want to tell you directly where we are headed because it is you, the people of Alberta, who have so much at stake.
The budget starts with the premise that we need to get our costs under control.
And one of the things you will see in the budget, in fact our projection for the next three budgets, is holding the line on government expenditures.
Holding the line on spending in a growing province is truly a cut.
It requires government to do more, with the same resources, and this will have an impact on many government services and on you.
This is not just about controlling costs. As I’ve emphasized tonight, we also need to get our program expenditures off the energy revenue rollercoaster and make our revenues more secure.
As one key example, when we present our new budget, we will be asking Albertans to begin to contribute directly to the costs of the health system. This revenue will start small but it will grow over three years.
But even as we look at revenue as part of our comprehensive fiscal approach, I have an important assurance to make to Albertans: we will retain the most competitive tax system in Canada, stated simply, we will not have a sales tax and we will still have the lowest taxes in Canada. And we will also ease the burden on working families.
Finally, when we talk about the 2015 budget, I want to emphasize that this budget is the start of a process. Not all of the changes will occur in the first year - we will phase in changes over the next three years.
The revenue shortfall will be decreased gradually and steadily – not suddenly – which would cause hardships to our most vulnerable citizens and impact our economy.
If we stick to this plan, we will be back to a balanced budget by 2017, even if oil prices do not recover as much as forecast. And if they do, Alberta will be in an even stronger position.
And unlike previous deficit-fighting efforts, we will continue to invest in needed infrastructure.
We cannot afford to fall behind as Alberta has done in the past. Even with the economy slowing down, we are still expecting 80,000 new Albertans this year– and they won’t be bringing schools, or roads or hospitals with them.
Tonight I’ve talked about change – well-managed change, thoughtful change, but fundamental change nonetheless.
I talked about public servants being essential to the solution.
But the same applies to all of us in Alberta. We can choose to look back and dwell on the factors which brought us here.
I choose to focus on what lies ahead – looking to the future for the province which means so much to us.
And just as I asked for the help of Alberta’s public servants, essentially I am talking about a spirit of openness across every segment of Alberta – from oil executives to dentists and welders – from loggers to bloggers.
It’s my job, as your premier, to lead many of the changes we need. But it can never be government alone which brings about major change. And a spirit of openness to set things right, from everybody in Alberta, will make a huge difference to our ultimate success.
Which brings me to the conclusion of my remarks tonight.
As much as we face some immediate challenges, the fundamentals of Alberta are strong. And Albertans are strong.
I’ve been struck that the fall in oil prices and the fiscal challenges have not created a feeling of deep pessimism in Alberta. We remain positive for good reason.
We are able to make realistic and thoughtful fiscal choices, if we’re prepared to act responsibly.
We have a province with great potential to diversify.
We are an educated people, with exceptional skills and talents. We have strong components of a knowledge-based economy and can build on this important asset.
We have resources which the world needs. Resources developed responsibly and marketed world-wide, improving global energy security and helping to address energy poverty in developing countries.
We take care of each other, whether we are in the best of times or more difficult times.
And finally, we have never lost the spirit which built Alberta and has sustained us through so many other challenges in the past. We are resilient and we are strong.
And now, it is on with the task at hand.
With your help, I will do everything I can to make things right, to make things better, for Alberta and for our future.
Thank you, and good night.