Carney’s budgeting proposal was a ‘disaster’ when Alberta tried it

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OTTAWA — Liberal leadership candidate Mark Carney’s new pitch for separate federal operating and capital budgets has some Albertans feeling a tinge of déjà vu, and not the warm and fuzzy sort.

Trevor Tombe, an economist at the University of Calgary, says he immediately noticed the similarities between Carney’s proposal and short-lived accounting rules introduced by then Alberta Progressive Conservative premier Alison Redford more than a decade ago.

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“That was my first thought,” said Tombe. “And it wasn’t a good thought, because it was a disaster when Redford tried that in the 2010s.”

The new accounting rules, first used in Redford’s 2013 budget, divided public expenditures into three categories: operational spending, capital spending and savings.

Redford and then finance minister Doug Horner said at the time the new rules would give Albertans a clearer picture of how their tax dollars were being spent.

Tombe says, with hindsight, the opposite was the case.

“When you ditch consolidated spending figures, and sort everything into these different buckets, that becomes a problem, because it makes it difficult to get a full financial picture,” said Tombe.

Tombe said the convoluted accounting in Redford’s 2013 and 2014 budgets left him and other economists having to add up some of the numbers on their own.

And it wasn’t just the ivory-tower eggheads who were rankled, as Redford’s contentious accounting rules soon became a political albatross.

Alberta’s auditor general slammed the two Redford budgets for failing to meet “basic public sector accounting standards” in a scathing mid-2014 report. Critics on the right linked the fast-and-loose accounting rules to the ballooning of the province’s debt under Redford’s watch.

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“It’s fair to say that (Redford) made choices to hide the deficit,” said Tombe.

Multiple scandals surrounding Redford’s personal use of taxpayer dollars led to her resignation in March 2014, just two years into her mandate.

Shortly after Redford’s departure, six former Alberta ministers of finance and treasury board presidents wrote a joint op-ed in the Calgary Herald calling on the next Progressive Conservative leader to ditch Redford’s accounting rules and go back to the ones used under Ralph Klein.

One of the editorial’s co-authors, Ted Morton, said that bringing in the widely panned accounting rules was Redford’s “third and final strike” as premier.

Carney’s campaign announced on Wednesday that, if he becomes prime minister, he’ll split the federal government’s operating and capital budgets as part of a plan to “spend less and invest more.”

Carney says he’ll balance operational spending, such as program spending and transfers to provinces and individuals, over his first three years in office.

He added, in a Wednesday interview, that he was willing to continue borrowing money indefinitely to finance major capital projects like pipelines and transportation infrastructure.

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“Where we are willing to borrow is to invest and grow this economy,” said Carney.

Economist and former finance official Jack Mintz says that capital-based budgeting schemes like the one floated by Carney tend to run into spending problems, largely because capital is a hard concept to define.

“One of the issues to get into is, how do you define capital? And some of the governments would go, like, if you spend money on teachers, you’re creating human capital. So that’s becomes capital,” said Mintz.

“In the end, it doesn’t matter, because if you take capital out, and you don’t have revenues to cover it, then you’re going to have borrow money, and your debt is going to go up.“

National Post
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