With corporate profits three times the average in other provinces, why is Alberta struggling with a budget deficit, Kevin Taft and co-authors ask in new book
By Sheila Pratt, edmontonjournal.comEDMONTON—This province is a great place to do business, but if Albertans knew just how great, they might have some tough questions for the provincial government, Alberta’s former Liberal leader says.Corporations here pulled in profit at three times the rate, per capita, of the level any other province, says Kevin Taft’s new book, entitled Follow the Money.With all that wealth, there are questions as to why the province is struggling with a $2-billion to $3-billion deficit, squeezing public services and education and saving so little.Where did all the money go? That’s the question Taft attempts to answer in this book written with University of Alberta economist Mel McMillan and researcher Junaid Jahangir using publicly available data from StatsCan, government documents and TD economic reports.“There’s nothing wrong with profitable companies. I want those in my pension plan, too,” Taft said in an interview.“But profits in Alberta are at double the rate of anywhere else, including the U.S., that’s what we are looking at.”What does that mean for public services in Alberta? That’s the issue, Taft said.Taft’s book, to be launched Wednesday night at the Garneau Theatre along with a video by Edmonton filmmaker Tom Radford. The event will kick off a pre-election campaign by the Alberta Federation of Labour and the advocacy group, Public Interest Alberta, said Gil McGowan, president of the AFL which covered the $50,000 to publish the book.“In this election, the province needs to have a discussion about how we will pay for public services,” McGowan said.“The Wildrose party wants the election to be about deficits and cutbacks. We say it should be the province’s low royalties and low corporate tax rates.”Public Interest Alberta boss Bill Moore Kilgannon said: “What Albertans really care about is high quality education and health care. But we should not base the number of nurses and teachers on the price of oil.”Taft’s research suggests there’s plenty of wealth in the province, but the provincial government is simply leaving too much of it on the table, he said. “We need to have an adult conversation about how to have the revenues to ensure the services. lWhat’s critical to understand is just how far ahead of the rest of the country Alberta sits with corporate wealth, Taft said. According to the 2005 and 2007 reports by TD Economics, corporate profits in Alberta as a share of GDP jumped to 22.8 per cent, compared with 12 per cent in the rest of Canada. In the U.S., corporate profits are historically 12 to 15 per cent of GDP.The big jump in corporate profits here began in the 1990s, but accelerated in mid-2000s. In 1989, corporate profits in Alberta were $4,400 per person. By the mid-1990s, the number climbed to $7,000 per capita and from 2004-08, before the downturn, profits ran at $16,000 per person.That’s three times the average of $5,075 per person in the nine other provinces, Taft said.Here’s another historic view for comparison: In Alberta, corporate profits more than doubled their share of the GDP from 1989 to 2008 from 9.6 per cent to 22.8 per cent.Some of those profits went into higher incomes for Albertans. Incomes here are up 35 per cent in the past 21 years after inflation is taken into account. Some of the money went into paying down government debt in the 1990s, Taft said.But overall, the share of the wealth that goes into public services has shrunk from 23 per cent in 1989 to 14 per cent between 2005 and 2009.So the next question, Taft said, is: Given the high profits in Alberta’s corporate sector, is the government leaving too much money on the table?That question is especially pertinent, given that the corporate sector’s wealth mostly comes from companies developing publicly owned resources, particularly Alberta’s vast energy reserves, Taft said.“These numbers tell me we are leaving too much on the table. We have to channel the spirit of Danny Williams,” said Taft, referring to former Newfoundland premier who drove a hard bargain with oil companies.It doesn’t necessarily mean Alberta needs to spend on public services, but it certainly means Alberta should do more saving, Taft said.“My personal view is spending on public services is where it needs to be. We don’t need to spend more, but we need to save. Otherwise, we face a painful reckoning in the future.”The most distressing number he said he uncovered was the falling value of the Heritage Fund, which is supposed to financially backstop Alberta when oil and gas run out.In 1976, when it was set up, it was worth about $4,040 per capita and it peaked in 1982 at $9,870 per person. Now, it’s at $3,934.“That just drives home the fact we are selling the farm to live the high life today,” he said.Taft’s book tackles a number of “myths” — first, that the province spends like drunken sailors. In reality, from 1989 to 1994, there was no increase in spending.A second myth, he said, is that debt was dangerously high. While high, it was only half the average in the other provinces, Taft said.
By Sheila Pratt, email@example.comThis article was published by the edmontonjournal.com on January 11, 2012, and was printed in the Journal on January 12. Read the full article on the Edmonton Journal website.