Calgary Sun January 21, 2007
Tories face backlash in shifting resource cash from haves to have-nots
Conservative Leader Stephen Harper promised during last year’s federal election campaign provincial non-renewable natural resource revenues would not be included in any new calculation of the federal equalization hand-out program.
But now Prime Minister Harper and Finance Minister Jim Flaherty are reported to be considering counting 50% of a province’s natural resource revenue in a revamped program.
The apparent change of heart comes from a panel chaired by Al O’Brien, a former deputy minister in our province.
Alberta, Saskatchewan and Newfoundland taxpayers would be soaked under this formula — while taxpayers in other provinces, particularly Quebec, would be clapping their hands in glee.
Indeed, it is reported Quebec would receive about $1.5 billion more under the new formula.
Currently under the program, ‘have-not’ provinces receive about $6,000 per person to provide public services comparable to the ‘have’ provinces.
We say to Harper and Flaherty: Keep your promises and keep you hands off our natural resources revenues.
If not, you’ll face a backlash reminiscent of Pierre Trudeau’s and Marc Lalonde’s hated National Energy Program (NEP). B.C. Premier Gordon Campbell calls the possible inclusion of resource revenues a “National Energy Program by stealth.”
The Conservatives, who swept Alberta in the Jan. 23 election, might even see a new Alberta First party arise and with it see the loss of any chance of winning a majority government.
In June, then-premier Ralph Klein warned he would fight “tooth and nail” any attempt to include natural resource revenues in any new equalization formula.
Premier Ed Stelmach calls the reports of the 50% cash grab “really troublesome” and Saskatchewan Premier Lorne Calvert’s government charges Harper’s government may be willing to sacrifice Western Canada’s oil and natural gas resources to win seats in Quebec.
Alberta Intergovernmental Affairs Minister Guy Boutilier points out our province’s taxpayers already send $31 billion a year to Ottawa, but receive $17 billion back in services. We’re a net contributor of $14 billion to the rest of the nation — isn’t that enough?
Only Alberta and Ontario have traditionally been ‘have’ provinces that do not receive equalization payments, but are expected to support the rest of the provinces to the tune of $14 billion a year in transfer payments. That could rise to $15 billion under the new formula.
Paradoxically, just as Saskatchewan is moving into the ‘have’ province lineup with its energy resources, and likely able to pay its way, this swipe from Ottawa would undercut the move.
Newfoundland, too, could be headed for a similar status with its energy reserves, but its growing resource wealth, too, may be undercut.
Why penalize success?
Campbell describes the rumoured move on revamping equalization as “establishing equalization as an insatiable entitlement program” in which provincial governments will be deterred from attempting to get their house in order.
The madness in the recommendations was no better pointed out by Newfoundland Premier Danny Williams, whose province will lose $100 million a year in revenues if the recommendations are acted on.
“In one year, we have turned a $5-billion deficit into a surplus. The recommendations would reverse that progress.”
Aside from the unfairness in such a new formula, the proponents have ignored how volatile resource prices are.
Oil has fallen to $52-a-barrel from $78-a-barrel in just a few months, and natural gas is down 40%.
There is no magic long-term panacea for the equalization issue with these kinds of rollercoaster rides.
Harper and Flaherty should also recall the wisdom of Abe Lincoln, who declared you do not make the poor rich by making the rich poor.
Alberta 'bad boys' to stir federal pot
Province seeks same rights as Quebec
Saturday, January 06, 2007
Calling Alberta "the bad boy" of Confederation, Intergovernmental Relations Minister Guy Boutilier says the province will fight for its own rights as a nation, including control over immigration.
In an interview with the Herald, Boutilier also indicated the Alberta government will stir things up on the national scene over the fiscal imbalance, the interprovincial struggle for a new equalization formula and whether revenues from oil and other non-renewable resources should be factored into the equation.
Boutilier said Alberta is a "powerhouse" very much driving the national economy, but won't brag about it.
Nonetheless, he said, it's not afraid to ruffle some feathers as it fights for what it sees as a fair deal with the other provinces and Ottawa.
"We're kind of the bad boys of Confederation," Boutilier said, adding that Albertans are proud Canadians.
"What Albertans understand is this: they contribute immensely to this country of ours, but also we want to be able to benefit from it."
Boutilier said Alberta and other provinces and territories are owed the same rights associated with the Quebec nation, a distinction recently approved by the House of Commons.
"Each province is a nation within a nation," he said.
What exactly that title means is open for interpretation, he added.
However, for Alberta, it could be more immigration powers to lessen the mounting labour crunch, and a federal solution to a fiscal imbalance that provinces claim sees Ottawa collecting more tax revenue than necessary, he said.
Boutilier's remarks follow new Premier Ed Stelmach's assertion last month that Alberta is a distinct entity and will fight for the same rights as Quebec.
But Paul Boothe, an economics professor at the University of Alberta who recently helped oversee the equalization program for Ottawa, said the province is already reaping the rewards of its place in Canada.
Many of the workers who are driving the Alberta economy come from other provinces and have had their educations partly funded by federal equalization dollars paid to those provinces to fund social programs.
"Confederation is working well for Alberta," Boothe said in an interview. "I'm not interested in Alberta being a bad boy. I'm interested in Alberta being a leader."
Albertans send $29 billion a year to Ottawa in federal taxes but receive back only $17 billion in programs and services, according to the provincial government.
Provinces also are fighting amongst each other and with Ottawa over the makeup of a new federal equalization formula. The program, which is paid for through federal taxation collected across Canada, allocates cash to "have-not" provinces so they can provide comparable levels of services at similar levels of taxation.
A handful of reports have been published recently by the provinces and a federal expert panel on how to calculate the equalization formula. A major sticking point among premiers is whether non-renewable resource revenues should be factored into the formula. Alberta and Saskatchewan are fiercely against it.
With provinces unable to agree on a formula, Boothe said Prime Minister Stephen Harper will likely unveil his own plan for the fiscal imbalance in a federal budget that could be released as soon as next month.
"If they can't reach consensus, what's the federal government to do?," he asked. "They've got to move ahead."
Stelmach will fight for Alberta 'nation'
Tory leader promises to review oil royalties; 'Northern' premier won't exclude Calgary; Province will pursue same rights as Quebec
Jason Fekete, With a file from Michelle Lang, Calgary Herald
Published: Tuesday, December 05, 2006
Premier-designate Ed Stelmach served notice Monday that Alberta will flex its political muscle on the national scene, vowing to fight for the same rights as a Quebec nation and to defend encroachments on the province's wealth.
In his first official press conference since a stunning victory Sunday in the Progressive Conservative leadership race, Stelmach was both emotional and assertive in a nearly 30-minute appearance in front of journalists at the legislature.
The affable 55-year-old -- who will be sworn in as Alberta's 13th premier Dec. 15 -- blinked back tears when he discussed his dedicated volunteers. But he
delivered a firm message to Prime Minister Stephen Harper, Quebec and Canada's other political leaders over Alberta's place in the country.
Stelmach said he's concerned about a handful of intergovernmental issues, including the debate about a new equalization formula and the fiscal imbalance, as well as the notion of Quebec as a nation within Canada.
"I'm going to fight for the same rights and privileges that may be assigned to this nation within a nation," the usually low-key Stelmach told reporters, gesturing with his hands to drive home his point.
"I'm going to be very careful. We're watching this."
The unassuming northern Alberta farmer and MLA said he had a "good, long chat" with Harper on Sunday and suggested he'll have a very good working relationship with Ottawa and his provincial colleagues. "I want to work with Stephen Harper and Ottawa to make sure that we build even a stronger Canada," he said.
A meeting between the prime minister and Alberta's next premier is planned for either later this month or early January, Stelmach added.
A more immediate concern is choosing a cabinet -- one he said will be smaller than Premier Ralph Klein's -- which will likely be unveiled next week prior to the swearing-in ceremony. He's also called a caucus meeting for Wednesday in Edmonton.
With massive responsibilities now thrust onto his shoulders, Stelmach and his wife Marie received a "special blessing" Sunday, from a Ukrainian Catholic priest in his hometown of Andrew, that he'll make "the best decisions for the province of Alberta."
Political observers said the bold Stelmach, like all new leaders, is trying to boost his profile, while creating a sense of "action and energy" following his weekend win.
Stelmach also came out firing against new federal Liberal Leader Stephane Dion, who said Sunday he wants to find ways to achieve more sustainable development in the booming oilsands by reviewing "the advantageous tax treatment" offered to oil and gas companies. "I'm going to tell them right off the bat that they have to be careful as to the kind of policies they start articulating," Stelmach said. "Any damage to Alberta's economy is going to severely hurt Ottawa and their treasury as well."
When asked about the federal Grits possibly eyeing Alberta's energy wealth, he tapped his chest and said: "They're going to be dealing with me."
While Stelmach spent much of his time targeting the federal Liberals, it's likely he will -- like Klein -- keep some distance between his government and the Harper Tories as well, said University of Lethbridge political scientist Peter McCormick.
"Stelmach has to show himself as his own guy with his own set of ideas," he said.
The new Tory chief identified labour, housing and infrastructure as key issues that need to be quickly addressed by the new government.
He's also focusing his attention on three campaign promises, including ensuring a more transparent government, strengthening the PC party and discussing with caucus his desire for an Alberta pension plan.
The forcefulness of Stelmach's comments caught the attention of opposition MLAs and already appear to have quashed any perception that his nice-guy image means he's a pushover. "Having a look at Mr. Stelmach today and how he did in his news conference, it just occurred to me that he's not a guy that I'm going to underestimate," said Alberta NDP Leader Brian Mason.
As Stelmach slowly takes the reins from Klein, speculation builds as to who will be named to his cabinet. Flanking him at Monday's news conference were Health Minister Iris Evans and Government Efficiency Minister Luke Ouellette, both Stelmach loyalists.
Calgary-area MLA Ted Morton, Stelmach's other main competitor in the race, said it would make sense if he were offered a cabinet posting in an effort to embrace the tens of thousands of party members who backed his campaign.
"I certainly hope I play a constructive role in the Stelmach government," Morton said.
Riches await us
By LINK BYFIELD
Fri, November 17, 2006
Suppose you could retire with a cash bonus of $250,000 to $500,000.
Would you take it? Who wouldn't?
Well, it is possible, if Albertans are smart enough to set it up.
There's only one catch, which we'll get to in a moment.
First, the idea. If you're a working stiff earning $43,000 a year or more, you put about $4,000 a year into a federal sinkhole called the Canada Pension Plan. When you retire, you get $10,000 a year back.
That's $200 a week. Good luck at the foodbank.
The CPP's rate of return is zero or less. Anyone starting work today might as well put $4,000 a year in a sock.
But no matter how ridiculous this is, no matter how inefficient and unjust, we send 50,000 young Albertans into our work force every year under a federal life sentence to surrender 10% of their earnings to the CPP.
There is an alternative. With three years' notice to Ottawa, our provincial government has a legal right to opt us out of the CPP -- as long as we set up a similar alternative -- an APP.
Just like Quebec with its QPP.
Alberta has a stronger economy, younger work force, higher birthrate and higher work-force participation than other CPP provinces. And not just because we're in a boom. This has been true since the CPP began in 1966.
As a result, Albertans put $1.50 into the CPP for every $1 we take out.
We get collectively hosed.
A Calgarian named Gordon Lang, who runs a firm of consulting actuaries (pension experts), has figured out a simple Alberta alternative. (I'll round the numbers slightly.)
Under Lang's proposal, Albertans would pay 10% of their first $43,000 into the APP, same as the CPP. However, with our demographic advantages, the APP will need only 8% to pay the same level of benefits as the CPP does with 10%.
The remaining 2% -- plus another 1% from provincial financial surpluses -- would be set aside and invested on the worker's behalf in his or her own APP "supplementary account" to be paid out in cash upon retirement, or if the contributor leaves Alberta and rejoins the CPP or the QPP.
This 3% might not sound like much, but over a lifetime of compound interest it adds up. Lang worked out the numbers.
Anyone contributing for a working lifetime at the upper end of the scale (as most do) can expect an age-65 APP bonus of at least $250,000, and probably more like $500,000.
That's in addition to the $800 monthly APP stipend, which would otherwise have come from the CPP.
How big a cash bonus any contributor gets depends, on how much they put in and on future interest rates. (www.app.ca)
The point is, we'd all pay the same as now, and everyone would get more back -- especially young people.
But as I said , there is a catch.
Opting out of the CPP will rock the federal boat. Even though it's our right, Ottawa won't be happy. Neither will other provinces.
They consider it our patriotic duty to pay $1.50 for $1 back -- though for some reason it's not Quebec's.
Unfortunately, only one of the eight leadership candidates running to replace Ralph Klein has committed to opting out of the CPP -- Ted Morton.
So if you want this plan -- or something like it -- you have to buy a $5 Conservative membership and vote for Ted Morton on Nov. 25.
To get a membership card, call 294-1001, or visit www.tedmorton.ca.
Seeing as only 5% of Albertans are likely to vote, and the new premier will probably govern Alberta for the next ten or 12 years, it may be the most powerful ballot you ever cast.
Capital idea for Albertans
Morton pension plan would pay dividends
By LICIA CORBELLA
Wed, November 15, 2006
A young man -- informed and well educated -- was despondent on the phone.
One of this 22-year-old's many woes was everything he paid into the ponzi scheme known as the Canada Pension Plan might be consumed by that enormous demographic group, the baby boomers, leaving him with nothing.
When he called, I was, coincidentally, reading a pamphlet I picked up at a cocktail party called: The Proposal for an Alberta Pension Plan (APP).
The pamphlet was created and given to me by Patrick Beauchamp, chair of the Alberta Residents League, a group with a motto of "More Alberta, Less Ottawa."
"Currently, Albertans pay about $4 billion annually into the Canada Pension Plan (CPP) and get a little more than $2 billion back annually," said Beauchamp.
"Why are we paying an extra $2 billion annually into the CPP that may not be there for anybody under 40 years old when they retire?" he asked.
It's a good question.
Under Section 94(a) of the Canadian Constitution, any province has the right to opt out of the CPP, so long as it operates its own separate plan, just like Quebec chose to do in 1966, when the CPP was formed.
Quebec's pension plan is far healthier than Canada's.
"The value of the Quebec pension plan is more than $102 billion while Alberta's share of the CPP is about $13.5 billion."
Considering Quebec's population is about three times larger than Alberta's, even when you triple Alberta's share of the CPP, that adds up to just $40.5 billion -- far short of Quebec's plan.
Beauchamp, who hired an actuary to crunch the numbers, said a 20-year-old starting out in the work force in 2011 and working until 60, would possibly receive triple what they could get from the CPP.
Besides a monthly cheque equivalent to, or greater to the CPP, under an APP, a supplementary plan would be established that would give contributors a lump sum of money when they retired at age 65.
For instance, assuming someone in their 20s, who made $40,000 a year, contributed to the APP until age 65 and the fund earn-ed interest at 6%, that worker would receive a lump sum of $453,656 upon retirement.
To find out what you might get, depending on your age or income, log onto www. albertapensionplan.ca
Beauchamp admits he got the idea from Alberta MLA and PC party leadership hopeful, Ted Morton.
Fellow-leadership hopeful Ed Stelmach has recently jumped on the APP bandwagon but said he'd also still force Albertans to pay into the CPP, which doesn't make any sense.
Of course, under Morton's plan, anyone who has already paid into the CPP would still receive their benefits and anyone who pays into the APP would receive their benefits regardless of where they live upon retirement, but only Alberta residents could pay into the plan.
Besides providing a better pension for young people, Morton says the advantages for the province are vast.
"The APP would very quickly become one of the largest pension funds in Canada and that will have two effects," says Morton.
"It will stimulate the banking and financial services sectors in Alberta which will contribute to economic diversification and also it will create a significant capital pool, not just for Alberta but for all of Western Canada, which has historically been something we've always lacked."
The depressed young man listened intently as I read from the pamphlet.
He hung up the phone more cheery than before.
An APP is certainly something Albertans should demand be debated, not just during the current leadership race, but afterwards by whoever wins the Tory leadership.
Alberta pension plan could workBy LINK BYFIELD
Calgary Herald Editorial Page
Saturday, October 21, 2006
At a campaign rally in Edmonton last week, Conservative leadership candidate Ed Stelmach promised to “fund a secure Alberta pension plan”.
Stelmach joins his leadership competitor, Ted Morton, in committing to an APP.
Of all the Tory promises wafting around Alberta, the APP could do the most good. For young Albertans, a properly structured Alberta pension plan could double the otherwise paltry $10,000 annual payout the can expect from the CPP.
For businesses, the attraction of an APP would speed the arrival of more workers and create a major Alberta-based investment fund. It would also help staunch the annual net $15 billion hemorrhage of Alberta revenues to Ottawa.
Anyone curious about how Alberta’s plan could work will find only vague statements about it on Morton’s and Stelmach’s websites. They’ll learn a lot more at www.AlbertaPensionPlan.ca. The plan proposed on this website is the handiwork of Pat Beauchamp and the Alberta Residents League, along with a committee of interested Albertans (including me). The technical brains behind the APP proposal is Calgarian Gordon Lang, who runs a national firm of consulting actuaries.
Alberta would exercise its constitutional right to opt out of CPP, as Quebec did when CPP started in 1965. Federal law allows any province wishing to establish its own public alternative plan to quit CPP after giving three years’ written notice to the federal minister of Human Resources.
CPP (like QPP) charges contributors premiums of 10 per cent of annual income between $3,500 and $42,000. The 10 per cent premium is split evenly between employee and employer.
The rate of return young people can expect on this investment of up to $4,000 per year when they retire is at best zero, and may even be negative. In other words, they’ll be lucky to get as much back in deflated dollars as they put in.
As for earning interest, forget it. CPP is largely unfunded, meaning it lacks a capital base big enough to pay for the benefits owing to pensioners, present and future. Today’s payouts to seniors are furnished mainly by what is brought in by today’s premiums. Although CPP is now 20 per cent covered by capital investments, Ottawa plans to continue running it mainly as pay as you go.
Because Alberta has a younger workforce than other provinces, a pension plan would need to charge only eight percent to return the same basic benefits CPP provides by charging 10 per cent.
The Alberta plan would continue to charge 10 per cent of the first $42,000 of income, but would consist of two parts. The first would be the basic plan, yielding the same as CPP. This is required by the federal Canada Pension Plan Act.
The remaining two per cent – augmented by a one per cent contribution from the province – would be invested in a supplementary account owned by the contributor and released when he or she retires or leaves the province.
Lang calculates the supplementary account of a young Albertan entering full-time workforce today would compound to $250,000 to $500,000 in extra savings by age 65, depending how much the person earns and on future rates of interest.
And unlike the CPP-equivalent basic plan, the APP supplementary plan would be the property of the contributor, not the government, to spend or bequeath to heirs. True, the Alberta government added to it, but only to make up for the fact that today’s seniors are taking more from CPP than they put in, at great cost to the young. Lang estimates the government’s share would be less that $500 million a year.
I have heard only three objections to this idea, none of which hold water.
Some say (leadership candidate Lyle Oberg) that it will somehow increase the liability Albertans owe for CPP. It will reduce it. For every CPP dollar that comes back to Alberta, Albertans now pay $1.50. Unless Alberta opts out, this penalty will continue.
Some say Alberta’s smaller plan would be more expensive to administer than CPP. Not so. Albertans are losing at least $750 million to CPP every year. By comparison, the cost of setting up and running our own pension plan would be quite small.
CPP was a foolish and needless federal trespass into provincial social jurisdictions that would never be contemplated today. Alberta has a chance to lead Canada toward the kind of regulated private pension alternatives that are proving so superior in countries such as Chile.
Morton and Stelmach have the right idea. An Alberta pension plan would secure the future of our provincial workforce, and encourage a long-overdue redesign of national social entitlements.
Link Byfield is and Alberta Senator-Elect, Chairman of the Citizens Centre for Freedom and Democracy, and was co-chair of last month’s Calgary Congress.
Change is blowing in the Alberta wind
Only one Tory leadership candidate would take province in new direction
By TED BYFIELD
Sun, October 8, 2006
Since the race for the leadership of the Alberta Tories has come down to a guessing game, here's this man's guess as to what's going on and what ought to happen.
I think it will become a contest between those Albertans who don't want change and those who do, and I think the latter are in the majority, and they're right.
Change, one might recall, proved the formula that saved the party before.
In the last contest for the Tory leadership, it was Ralph Klein who stood for change while Nancy Betkowski stood for the status quo.
The party voted for Ralph, and survived in office for another 14 years.
Nancy went on to change her marriage, her name and her party and emerged as Nancy MacBeth, the leader of the Alberta Liberals.
Since the Tories had already been in office for 21 years, this makes for quite a record, but not yet an all-time one.
The Social Credit administration that preceded the Tories held office for 36 years, one more than the Tories to date.
But since the Tory mandate can go on at least two more years, they are almost certain to top the long Social Credit regime.
The Tories have done this, not by affirming the status quo, but by substantially changing it.
The difference between the style of Peter Lougheed who brought the party to power and Don Getty who succeeded him on the one hand, and Ralph on the other is startling.
Undoubtedly, the leadership candidate who most represents the status quo is Jim Dinning, a former provincial treasurer and minister of education.
His backers boast he now commands the support of 60% of the present Tory caucus.
"Jim's been being groomed for this job for 20 years," says former MP Lee Richardson, a top Dinning supporter.
Dinning's half-dozen or so corporate directorships recommend him as the candidate of the establishment, and that's the way Dinning himself seems to want to be viewed.
So who stands for change?
All the other candidates would up to a point claim that role of course, but none so distinctly as Ted Morton, the political science professor and one of the six authors of what is called "the Alberta Agenda," a program for fundamental change advanced in an open letter to Premier Klein in January, 2001. Another of the six, one might note, was a certain Stephen Harper, now prime minister.
The slogan of the Agenda was "more Alberta, less Ottawa," and it advanced five proposals: An Alberta pension plan to replace the ever-more-precarious Canada Pension Plan; Alberta to collect its own personal income tax as it already collects the corporate income tax; an Alberta police force (just as there are Quebec and Ontario police forces); an Alberta Health plan; and the restoration of the provincial role in immigration.
Morton is committed to all five proposals, the other leadership candidates only certain aspects, not all.
Moreover, Morton favours using, rather than shunning, the "notwithstanding clause" in the Charter of Rights and Freedoms that empowers the province to quash rulings of the Supreme Court of Canada in areas that affect provincial jurisdiction.
In other words, Morton stands for decisive change in specific areas, which he has carefully considered and enunciated since the Agenda was created five years ago.
In this he resembles his fellow-signator Harper.
The two have that quality in common.
What enables Harper to weather so successfully the media and Opposition flak that incessantly descends upon him is the fact he has long considered the issues involved, knows what he intends to do, and can advance and defend it superbly.
Morton exhibits precisely the same qualities.
Like Harper, he has learned to translate these issues from the language of the faculty room to the language of the conference room, the board room, the locker room and the living room.
He has learned, that is, to sell the case wherever it has to be sold, and he deeply believes in it.
Curiously, so does Harper.
He is plainly determined to reverse the centrist direction of the federal government and restore to the provinces the powers Ottawa over the years has usurped from them.
This was the resolve of last weekend's Calgary Congress and Morton is obviously the man to carry it out.
Announcement: Wednesday Sept, 27, 2006
Leadership Candidate Ed Stelmach proposes Alberta Pension Plan (APP)
Follwing comments by: Pat Beauchamp
As always, the usual uninformed chattering class goes negative on this commonsense idea.
Their argument is this; Alberta would have to come up with our share of the CPP’s unfunded liability. What they don’t seem to realize is that Albertans will have to pick up their share of the liability one way or the other, so in this regard an APP would also be entitled to its share of the CPP’s assets estimated to be around $100 billion. Our share being about 13.5% or around $13.5 billion.
People must remember the CPP is a pay-as-you-go-cash-flow scheme. This means that the only way it works is if there are more contributors than takers. The Alberta Chamber of Commerce has called the CPP a “pyramid Scheme.” Another name that has been used to describe it by others is a “Ponzi scheme.” Pyramids or Ponzi scams, are actually illegal in the private sector as they have been proven to be unsustainable.
Whilst the APP would agree to assume its fair share of the CPP unfunded liability or deficit, the Province of Alberta and Albertans themselves are already on the hook for this deficit for our own retires in Alberta. Under a separate APP, however, the Province/ Albertans would have choices as to its disposition.
The actual fact is if Alberta created its own APP since we pay an extra 34% into the CPP that money would stay in Alberta, plus an extra $13.5 billion (our share) of the CPP Fund would be under Alberta’s control not Ottawa’s. For this last reason alone we should do it.
Patrick (Pat) Beauchamp