Ralph or Rachel: Who had the tougher challenge?
In this excerpt from Ralph vs. Rachel: A tale of two Alberta premiers, I look at the economic and fiscal challenges faced by both Premier Ralph Klein (who entered office in December 1992) and Premier Rachel Notley, who became premier in May 2015. If the question is “Who had it worse?’ the frank answer is “both”. The similarities and stark differences in the challenges are chronicled in chapter 2 “Similar economic storms in 1993 and 2015.”
The Ralph and Rachel welcome: (Almost) seven years of red ink
Both premiers faced budgets that were made all the more challenging by the high-spending premiers that preceded them.
In Klein’s case, government expenditures had been reduced (somewhat) from the nosebleed levels of $13,169 per person in 1986 under Premier Don Getty, but were still historically high. Per-person program spending dropped steadily for six years—something for which his government received little credit at the time due to failing loans to businesses and also chronic missed-targets on balanced budgets. However, the Getty government hiked spending in the year Klein came to power (the budget year that ended in March 1993). That, along with a growing debt financed with relatively high interest rates, was the challenge faced by Klein.
When Notley entered office in 2015, she was faced with program spending that rose under Ed Stelmach and Alison Redford beyond what inflation and population growth required, from just under $10,800 per person in 2007 to a high of $13,400 in 2014 before dropping again in the “hand-off” year when the NDP came to power, to just over $12,300 per person. The first NDP year was essentially flat—for program spending—but rose to just over $13,000 by 2018.
All of that understates the spending and borrowing problem under the late-era Progressive Conservative government and the NDP: both began to raid the various savings funds and also borrowed and spent heavily on the capital side of the provincial budget. It is why the funds began to empty out under Ed Stelmach, Alison Redford, Dave Hancock (the interim premier), and Jim Prentice, and then were drained completely under the NDP.
Both Klein and Notley were arguably part of the initial problem.
Klein was in caucus and cabinet as part of the Don Getty government after 1989, the same regime which threw money at diversification projects that would later flop and cost the province $2.3 billion.
The opposition Liberals under Laurence Decore, a former Edmonton mayor, consistently made the case that the Tory government was in an over-spending, fiscal mess of their own design—an accurate charge. Rachel Notley was a lifelong New Democrat whose party had been reflexively critical of any reductions to government spending in the 1990s and ever since; so the new premier, post-2015, could hardly complain about previous PC government indulgences on that side of the fiscal ledger. As a matter of principle, Notley thought governments should tax and spend more—and borrow much more. It is in part how she defines compassion.
For Klein, reduced resource revenues since the mid-1980s, still-high program spending and relatively high interest rates resulted in a fiscal train wreck, one still barreling down the tracks towards the debt cliff when he became premier in December 1992. There were already seven consecutive deficits on the books. When Rachel Notley entered the office of premier, she faced nearly the same situation: six deficits with a tiny-surplus year of $22 million in 2015.
True, the defeated Progressive Conservative government claimed a higher surplus, over $1.1 billion; but that claim resulted from that government’s revised accounting that ended a more defensible definition of surpluses and deficits since 1993. If the straightforward Klein-era approach was used3, Alberta incurred six deficits and a barely break-even budget just before the NDP took power. For the NDP, that was a better scenario than the $5.9 billion deficit Klein faced in December 1992 when he became premier. Still, with steep drop in oil prices in 2015 akin to the 1986 swoon, the Notley government had no economic May Day of a picnic either after its 2015 election victory. The NDP government also faced a severe budget crisis not of its own making, at least initially.
In 1993 and 2015, two Alberta premiers faced similar economic and fiscal challenges: low or declining energy prices, a weak economy and relatively high government spending by their predecessors.
The differences: Notley was forced to grapple with a steeper oil- price drop just as she entered office and anti-Alberta policies from politicians elsewhere in the country; Klein played cleanup for every fiscal problem the Progressive Conservatives let lapse or exacerbated since 1986 and faced significantly higher interest rates with a greater proportion of tax dollars funneled to debt interest.
Both Ralph Klein and Rachel Notley showed up for “game day.” The key difference was in how each politician responded once up to bat.