A comprehensive fiscal sustainability analysis is key to managing risks in Alberta’s resource-based economy

Lennie Kaplan: Long-term fiscal sustainability analysis and reporting critical for Alberta's economyNow that Premier Danielle Smith has taken the first step, with a commitment to publicly release an Alberta long-term financial plan, it is time to take the more difficult but necessary steps and implement a comprehensive long-term fiscal sustainability analysis and reporting framework for Alberta once and for all.

As I noted earlier, Alberta has been slow to “come to the table” when implementing a long-term fiscal sustainability analysis and reporting framework. Hence, the Premier’s comments during her February TV address to Albertans were very encouraging. But now comes the hard work: translating these encouraging words into a plan of action. This will require a major change of thinking within the upper echelons of Alberta’s public service.

Alberta’s public service needs to recognize that long-term fiscal sustainability analysis and reporting are critical for managing the unique risks associated with a resource-based economy like Alberta’s. Dealing with the volatility of oil and gas revenues requires more robust planning than found through the three- to five-year fiscal outlooks. It also needs to be accompanied by more informative risk analysis to help ensure that long-term finances remain on track in the face of commodity price shocks, changing demographic patterns, and the accelerating pace of the energy transition.

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KEEP AN EYE ON ALBERTA

Continuing to emphasize short-term fiscal outlooks does a disservice to elected officials and decision-makers who need better information from the Alberta public service to shift their thinking toward considering the longer-term consequences of policy decisions.

As someone who has worked extensively on issues related to long-term fiscal sustainability, both inside and outside the Alberta government, for nearly three decades, here are my ideas for a comprehensive long-term fiscal sustainability analysis and reporting framework for Alberta:

  • Establish robust systems and processes within government to analyze and report on the medium- to long-term fiscal impacts of Alberta’s demographic, economic and fiscal risks and challenges, as well as the medium- to long-term impacts of government policies;
  • Require that internal decision memos on public policy proposals, such as Ministers’ Reports (MRs), include an analysis of the impact of policy options on the province’s long-term fiscal sustainability;
  • Establish a definitive time horizon (10 years or longer) for long-term fiscal sustainability analysis and reporting within government;
  • Prepare and publicly release a comprehensive long-term fiscal sustainability report at least once every three years, providing useful information on long-term fiscal sustainability that is understandable to Albertans;
  • Establish a statutory or legal requirement for long-term fiscal sustainability reporting in the province’s new fiscal framework (the Sustainable Fiscal Planning and Reporting Act) as a show of government commitment to managing future long-term risks and challenges in a prudent manner;
  • Clearly present the methodology, key demographic, economic and fiscal assumptions, and data sources for long-term fiscal sustainability analysis and reporting to Albertans;
  • Provide information to Albertans on how long-term fiscal sustainability models are built and used to assess long-term fiscal sustainability and
  • Establish clear accountability mechanisms for long-term fiscal sustainability analysis and reporting, including accountability to Cabinet, Treasury Board Committee, the Legislative Assembly, and Legislative Assembly Standing Committees.

So, now comes the hard work for Alberta’s public service: translating Premier Smith’s commitment to Alberta’s long-term financial planning into concrete actions.

Lennie Kaplan spent over two decades in the Alberta Public Service, including as a senior manager in the Fiscal and Economic Policy Division of the Ministry of Treasury Board and Finance, where he worked on examining best practices in long-term fiscal sustainability analysis and reporting in other jurisdictions. He also served as the chief consultant to the Office of Alberta’s Auditor General on its 2018 commentary, “Putting Alberta’s Financial Future in Focus,” and as Executive Director to the MacKinnon Panel on Alberta’s Finances in 2019. He recently retired from his position as Executive Director of Research at the Canadian Energy Centre.

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