An open letter to Premier Kenney

Submitted by rudy on Mon, 03/16/2020 - 13:48

March 28, 2020

Dear Mr. Kenney:

Summary: I see your government as trying hard to do the right things, but you are acting on some very bad advice from Mackinnon whose net effects, intended or not, risk bringing the NDP back into power.

The crisises du jour are first the effects of covid-19 virus and second Teck and related energy issues as Trudeau et al stick it to Alberta again. The primary effects of both are, of course, to directly reduce the well being of Albertans, threaten the government's financial position, and reduce productivity in the province. The secondary effects are political: failing to reverse the situation would, like acting on the Mackinnon recommendations, leave your government considerably weaker.

There may be nothing useful your government can do to reduce the direct effects of the public and federal reactions to the covid-19 pandemic, but you can prepare for the aftermath, and you can largely reverse the effects of the federal attack on Alberta's energy industries.

One of the probable effects of the public reaction to the virus issue will be to accelerate the decline in Chinese manufacturing and thus energy demand while increasing energy demand in the U.S. and parts of western Europe, particularly the U.K. As a result markets for oil and gas shipped by pipeline to the west coast may be expected to weaken for a few years, while those for product shipped to the U.S. and Europe will probably strengthen. Consider, in that context, using an executive order to leverage Alberta's credit resources in building a refining center near the American border while also laying pipe to that center from producing areas across the province - that refinery then lets the Americans sell their product to Europe while we sell into the northern tier states and represents a major win for everybody except China, Russia, and the middle eastern oil sheiks.

Those pipelines can be routed around areas, like reservations, where legal action can stop them; the USMCA guarantees market access for refined products in a way that would be too costly for Trudeau et al to interrupt; the order in council approach eliminates five years of approval processes and so reduces the expected cost from around sixteen billion to perhaps eleven; and Alberta's position as the financial backstop for the project will make it much more difficult for a future government to stop or mothball the project.

More importantly, announcing the project now and endowing it with the political urgency and will the Soviet Union used to put into their Hero Projects would go a long way to revitalizing the economy, first in Calgary and then in most of the rest of the province.

Assuming you back off those health care related ideas from the Mackinnon report you have begun to act on, that sector will settle down and muddle along until you develop a real long term strategy for dealing with it - on which I have much more to say, but not now. For now, I'd like to update an idea from a few years ago that could help address the coming financial crisis in our post secondary institutions while reducing civil service costs and growth rates:

 

There are many barriers to laying off civil servants the most important of which is that it really doesn't work well as a means of reducing an annual deficit. The reason it doesn't is, of course, that the direct salaries, overheads, and entitlements run up by those tens of thousands of faceless bureaucrats don't actually amount to much relative to the big entitlement programs: health care, education, and human services. Basically, if the entire nominal civil service (i.e. excluding the healthcare, education, and justice establishments) worked for free, the effect on the budget would be almost negligible.

Still, if the government pushes a 10% average budget cut on the civil service, there will be layoffs and so the question is: who should go?

In the usual process there's a hiring freeze, some scores get settled, some ambitions get cut off, a few clerks get laid off, and a lot of people in late middle age take early retirement.

Generally speaking this has little effect on costs - every department reports a million here or a million there, but in a $60 billion budget it doesn't amount to squat. Worse, the overall demographic in the civil service changes as younger and more aggressive players quickly move up - with the result that growth as money eventually loosens always exceeds the pre-cut forecast rate.

So here's a better idea: a strong freeze onnew positions accompanied by an open offer giving any current government or public agency  employee (including those working in health, education, or justice) under some age in the 35 to 50 range enrolling in a full time science (including healthcare), trades, or professional program at an accredited Alberta institution a bundle of benefits including non pension related benefit continuation and up to 80% of his or her salary for up to four years. In exchange the person agrees not to accept direct government employment for up to 5 times the number of years he or she spent in the program - and, of course, nominal employment ends with no further severance or support after the four year maximum.

This will cost much more than doing the usual thing, but those costs are spread over five years instead of one  and what we get for the money might be awesome: six to eight thousand committed young adults graduating in a wide range of trades or professions? and most with deep roots in Alberta? that's got to be good for everybody.

And the 20% reduction for perhaps 6,000 people is going to net out in the 60 to 80 million dollar per year savings range - trivial in the budget context, but broadly the same as laying off 2,000 tomorrow - and,because nominally they're still on the payroll, no replacements can be hired.

Meanwhile, the zinger is in the effect on civil service demographics: giving many of the best and brightest clear paths to success outside the civil service will change the mix among survivors to one that's older and much more risk averse - meaning that civil service impacts on the private sector (especially in terms of new regulation and information demands) will be reduced while internal pressures for growth will ease.

Defanging the civil service is never trivial, but the "real zinger" in today's context is that you would be sending the advanced education sector about 6,000 new paying customers most of whom would be entering  at the post graduate or pre-professional level where per student facility costs are lower but salary costs are higher then they are for undergraduate students. The influx would, therefore, greatly reduce the institutional budget crisis developing now while shifting  institutional budgets from administration and basket weaving to research and professional preparation - it's the ultimate win-win.