THE BLOG

Why I Think Alberta Finance Minister Doug Horner Is Breaking The Law

09/04/2012 08:45 EDT | Updated 11/01/2012 05:12 EDT
CP

... well considering he has about 30 hours to come into compliance with the law, perhaps I'm speaking to soon... but I'm getting ahead of myself, allow me to explain:

Back in the late 1980s and early 1990s, the Alberta Government was going through some fiscal trouble. They had been running deficits every year since 1986 and Albertans were growing restless of watching the provincial debt clock tick upwards.

Despite various three-year plans to balance the books through "finding efficiencies" and "program reviews" they hadn't quite made it. But that was all going to change. In 1991, Provincial Treasurer Dick Johnston declared to the world this: "The 1991 budget delivers on all our commitments to Albertans. Mr. Speaker, this is a balanced budget."

Nice!

Except it wasn't true. The truth was that the provincial government had fudged the numbers and in fact the government ended up running a $2.6 billion deficit, the second largest deficit while under Don Getty's watch.

This game of jiggery-pokery wasn't appreciated by Albertans and as such they started demanding the government open up their books and tell Albertans on a regular basis what was going on with the provincial budget.

This did not fall on deaf ears. When Ralph Klein took over as premier in 1992, one of his tasks to his new finance minister, Jim Dinning, was to restore confidence in Alberta's books.

From that, Bill 67 the Deficit Elimination Act was created. Among many very good other things, the Act tied the hands of the Provincial Treasurer (Finance Minister) to ensure they had to report every three months to the public on how close the government was to meeting its budget.

In fact, during third reading of the Bill on May 14, 1993, then Provincial Treasurer Dinning explained this part of the Bill and what it would require the Provincial Treasurer of the day to do: "the Treasurer be called upon and required publicly each quarter to report on the budget performance and how well it's on track or off track and the actions taken to bring it back on track."

The Bill laid out this section very clearly as well:

9(1) The Provincial Treasurer shall report publicly to the Lieutenant Governor in Council on the accuracy of the budget estimates and on revenue and expenditures to date,

(a) with respect to the first 3 months of a fiscal year, on or before August 31 in that year,

(b) with respect to the first 6 months of a fiscal year, on or before November 30 in that year, and

(c) with respect to the first 9 months of a fiscal year, on or before February 28 in that year.

(2) The Provincial Treasurer may determine the form of a report made under this section.

Over the years, different pieces of legislation have been amalgamated, amended and changed around. But the tenants of this act remain, although they are now included in the Government Accountability Act:

Reports on progress

9(1) The Minister of Finance must report publicly to the Lieutenant Governor in Council on the accuracy of the consolidated fiscal plan for a fiscal year,

(a) with respect to the first 3 months of the fiscal year, on or before August 31 in that year,

(b) with respect to the first 6 months of the fiscal year, on or before November 30 in that year, and

(c) with respect to the first 9 months of the fiscal year, on or before February 28 in that year.

(2) The Minister of Finance may determine the form of a report made under this section.

(3) If a report made by the Minister of Finance under this section includes all the information that is required to be given in a quarterly fiscal report under any other Act, the report under this section is deemed also to be made for the purposes of the other Act.

While the act allows some flexibility in which form the report is made, it clearly states that the minister must report on the "accuracy of the consolidated fiscal plan," and here's where I believe Alison Redford's current Minister of Finance and Treasury Board is on the wrong side of the law. Earlier today he released a document which they've decided to call the 2012-13 Fiscal Update and Economic Statement.

The document contains a handful of colourful graphs, but little in the way of numbers. In fact, the three pages that do actually contain numbers (pages 2, 3 and 7) give only an update as to money that has actually been spent in the first quarter of the fiscal year and no projection as to whether the overall budget is still on track or whether the budget released in the spring was accurate.

Accuracy of the consolidated fiscal plan cannot be ascertained by providing what money has been collected and spent in the first three months. This was made clear when CKUA reporter Ian Gray asked Mr. Horner why revenues from "Premiums, fees and licenses" were sitting at $644 million when the quarterly document claims it had been projected at $348 million for the first quarter. Mr. Horner essentially explained that these things ebb and flow throughout the year and that they will likely be back to the original, full-year estimate of $1.39 billion in revenue by March 31, 2013. So, it took a reporter asking the Finance Minister about the accuracy of the projections in the Consolidated Fiscal Plan to find out if they were still accurate. The document Mr. Horner is parading as quarterly budget update does not, and hence is a violation of the Government Accountability Act.

But that's not where this ends. The Government Accountability Act states that the report must report on the accuracy of the "consolidated fiscal plan."

So, what has to be in the "consolidated fiscal plan?"

Well section 5 of the Government Accountability Act lays that out as well:

Specific contents of consolidated fiscal plan

5(1) A consolidated fiscal plan must include estimated amounts for the Government for the fiscal year of

(a) the total revenue and a breakdown by sources of revenue,

(b) the total expense and a breakdown by category of expense,

(c) the consolidated net revenue or expense,

(d) the total capital investment, including a breakdown of capital investment by ministry,

(e) the economic cushion under the Fiscal Responsibility Act,

(f) the net financial position and a breakdown by liabilities and financial and other assets,

(g) the borrowing requirements, and

(h) any other information the Minister of Finance considers appropriate.

What Mr. Horner released today was a "Consolidated Fiscal Summary" not the "Consolidated Fiscal Plan" and that's not just semantics. Nowhere in the document is information relating to section 5(e), (f) and (g).

Whereas in previous quarterly updates they have included tables detailing borrowing requirements and the net financial position and a breakdown of liabilities, this information is nowhere to be found in Mr. Horner's update today.

So, I submit that a) he has violated the Act by not providing information that would allow a reasonable person to determine "accuracy," and b) he's also violated the Act by not providing information required under the "Consolidated Fiscal Plan," such as a balance sheet or breakdown of liabilities.

And that's being generous.

And even then, they are only summarizing spending and revenue into broad categories. In fact, there's no longer a breakdown as to the amount of revenue the government received from Corporate taxes, Tobacco Taxes, Fuel Taxes, Insurance Taxes, Oil Royalties, Education Property Taxes, Natural Gas Royalties, and dozens of other categories.

Compare this to the first quarter update that was released in August of 2011: http://www.finance.alberta.ca/publications/budget/quarterly/2012/2012-1st-quarter-report.pdf

Ever since the Deficit Elimination Act was passed into law in May of 1993, finance ministers have been providing updates that looked very similar to the one released in August of 2011. It contained not only the information we got today, but projections for the rest of the year and explanations as to why those numbers might have changed or will change for revenue (broken down by 43 different categories, rather than the 8 we got today) and expenses. It also included, importantly, a balance sheet that contained and update and forecast for things like the balance of the Heritage Fund, self-supporting lending organizations, the Sustainability Fund and others, as well as the accuracy and updates for the accumulated debt, pension liabilities, liabilities for capital projects and others.

In closing I have three final thoughts.

One, it's insulting and instructive to learn that the government cancelled the pre-press conference technical briefing for reporters. This is an opportunity for reporters to see an embargoed copy of the report and to ask Finance department officials questions about the numbers. Mr. Horner brought up the fact that the technical briefing was cancelled because essentially the numbers were too confusing and if they have a tough time explaining them to reporters, how are reporters supposed to explain them to Albertans. Or in other words, reporters are too stupid to explain to the even stupider Albertans how Alberta's finances are looking every three months.

Two, the quarterly budget update requirement brought in 19 years ago by Jim Dinning was good legislation and it was important legislation. Over 19 years (76 quarterly updates) 10 finance ministers have stood in the press room in the basement of the Legislature and provided the public with a detailed report on the accuracy of their budget, every three months. Today was the first time in nearly two decades that has not happened. Don't take my word for it. Go and look at any one of the quarterly budget updates here: http://www.finance.alberta.ca/publications/budget/index.html

Three, the Alberta government used to be heralded by me and others for the details, transparency and easy to understand budgets and quarterly updates. No more. When governments start to try and hide information from the public, look out.