Unless, of course, its guiding principle is simply to tax and spend with abandon
The NDP government in Alberta has delayed introducing its first budget until the fall, which should give its new MLAs plenty of time to think about how they’ll collect and spend Albertans’ money.
But to properly manage the estimated $48.4 billion in provincial budget expenditures, it helps to become familiar with where the money is currently being spent.
First, I would like to be clear that some goals – universal access to education and healthcare – are laudable, but that doesn’t mean governments should own and operate every school and every hospital.
While provincial governments are not complete monopolists within those two areas, much of the delivery of such necessary services are limited to government unions which have no interest in delivering services more efficiently. Here’s one fact to remember: In Canada, 70.6 per cent of healthcare money is spent by government, with much of the government-related delivery being unionized.
That fact is unsettling as government monopolies (or near monopolies, in the case of government-provided education and healthcare), just like those that occur in the private sector, offer a lack of options and allows one supplier to charge high prices while providing low-quality services or goods with no real necessity to innovate.
As for how the money is spent, staffing costs in Alberta, as in many organizations, are significant: almost 50 per cent – or $24 billion – of provincial expenditures went to government and public-sector compensation costs in 2014/15.
This leads to this question for Alberta’s new NDP government: Does it understand that the government sector enjoys a compensation premium relative to the private sector?
In Alberta, government-sector workers and others in the broad public sector reap a 6.9 per cent wage premium over private-sector workers in similar jobs, accounted for by education, length of time in the workforce, age, among other factors.
But that wage premium doesn’t take into account the fact that almost 78 per cent of government-sector workers in Alberta have a registered pension plan. More than 97 per cent of that 78 per cent are in the gold-plated defined benefits plan.
In the private sector, just under 22 per cent have registered pension plans, with only about four in 10 of those receiving the guaranteed defined benefits variety.
The wage premium also doesn’t take into account that government- and public-sector workers in Alberta retire more than one year earlier than private-sector workers (and thus start their defined benefit pensions earlier).
Why does all of this matter? Because those higher-than-private-sector wages, generous and early retirement pensions, and other benefits come from the public treasury, that is, from taxpayers. And unless one believes that tax dollars grow on magical tax trees, money taxed away from people means one of two things:
1) money is diverted from families and their priorities, such as saving for higher education or retirement. Politicians, especially new ones, should keep in mind that families have other needs, ones often very different from the priorities of politicians.
2) these days we’re all getting less for the taxes we’re paying.
Above-private-sector salaries and generous pension plans come at the cost of building new or refurbished old schools and hospitals or from hiring new teachers, nurses and doctors. Simply put, when additional tax dollars are spent on those already employed in the government system, governments are pushing on a string in any attempt to improve the quality and quantity of education, healthcare and other programs the government is heavily involved in courtesy of our tax dollars.
The new Alberta government may wish to review these hard facts and real numbers in advance of its fall budget – at least if its guiding assumption is not to simply tax and spend with abandon.
By Mark Milke
Mark Milke is a senior fellow at the Fraser Institute and co-author with Milagros Palacios of Fumbling the Alberta Advantage: How Alberta Squandered a Decade of High Energy Prices.