The good times are over (again) for Alberta

Alberta has been here before, but not for a long while.

Yes, the financial crisis of 2008 affected everyone, including the oil patch and the provincial coffers it filled. And while the pain it inflicted on Alberta was not insignificant, it was relatively short-lived. The government had a huge savings account to buffer much of the blow.

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The economic emergency that Alberta faces today is different and perhaps more analogous to the predicament in which the province found itself in the early 1990s, when the accumulated debt reached $23-billion thanks to a worldwide oil glut that led to a crash in the price of crude. This ignited a brutal program of spending cuts under Ralph Klein the likes of which the province has not seen since.

Which brings us to today, and the eerily similar circumstances Premier Jim Prentice is dealing with.

The drop in oil prices has hit Alberta like a bomb. Few saw it coming. With the price of crude hovering around $50 a barrel, the news out of the oil towers in downtown Calgary gets worse every day. If it’s not Cenovus Energy Inc. announcing massive layoffs as it did this week, it’s Husky Energy Inc. saying it needs to find nearly $1-billion in savings to make up for projected revenue losses. The hit to the provincial treasury for the upcoming fiscal year alone is anticipated to be close to $7-billion.

This has forced Mr. Prentice into a situation he could not have imagined when he assumed office last September. This week, he and his Finance Minister, Robin Campbell, announced the upcoming budget will have a nine per cent cut in program spending. Likely nothing, including health care and education, is considered sacrosanct. The Premier has made that much clear.

“We all need to be living in the real world …” Mr. Prentice said this week.

People in other parts of the country would say Albertans have not resided in that world for some time. That is not their fault. When you live and work in a jurisdiction that has been awash with money the way Alberta has been for years, you come to accept the lavish wages, and benefits that go with it, as normal. The public service, in particular, has been the beneficiary of cash-rich governments that opted to give in to often obscene wage demands rather than endure a nasty strike.

Well, the moment of reckoning has arrived.

Nurses, doctors, teachers, all best be braced for wage cuts and future contracts with lots of zeroes in them. They will be the types of contracts public servants in other jurisdictions in the country have often had to accept, while casting an envious eye in Alberta’s direction.

The cities of Calgary and Edmonton, both of which have grand transit plans that depend on significant cash infusions from the province, will likely have to put their dreams on hold for a while. Mr. Prentice has already signalled how serious he is about introducing an austerity program not seen in the province since The Klein Revolution of 1993. He recently turned down a $275,000 funding request from the province’s Child and Youth Advocate to help protect vulnerable kids in government care. Many were shocked at sheer coldness of the rebuke.

People better get used to it.

Albertans of a certain age will say it is still nothing compared to the ruthless exercise in program slashing that took place under Mr. Klein, in which some government departments faced cuts of up to 20 per cent. It is unclear if Mr. Prentice will have to slash the operating expenses of some ministries to that extent. Nor is it evident yet how long this reconciliation with the uncertain times in which the province finds itself will continue.

Mr. Prentice has suggested the province will have to run small deficits likely for several years. And as long as the government is doing that, there will be no money for a lot of different things.

Alberta’s winters are always frigid. This spring could be especially cold.

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