Alberta’s budget should cut fat, not muscle

We need to look at investing in wellness, writes Adam Legge.

We all face decisions about investments and expenditures on a daily basis. The fact of the matter is that they are different. Investments are things we pay for that have a return — they increase in value, whether that is a house, a portfolio, an individual or a business.

Expenses rarely have a return that drives additional value — they are just needed to keep the lights on and ensure that work can get done. Much of our province’s budget challenge can be addressed by understanding this distinction.

How do we know whether something is an investment or an expense?

Often, investments can be tied to a level of performance, whereas expenses cannot. So, for example, spending money on new diagnostic imaging equipment that allows Alberta doctors to see 15 per cent more patients per hour is an investment.

Spending that same amount of money on stockpiles of latex gloves for doctors and nurses does nothing to improve health care. It is an expense. Additionally, paying more than you need to for a given outcome is an expense, because you should be able to get the same thing for the same price elsewhere.

I hope that in the effort to bring Alberta’s fiscal picture back in line, our government considers the difference between investments and expenses.

Health care is our No. 1 expense in Alberta. While necessary to improve quality of life, cataract surgery and hip replacements are expenses, not investments.

Wellness is an investment, however. We should be looking at the wellness of Albertans instead, and focus expenditure to that — in the areas of education, nutrition, physical fitness and so on. Those will reduce health-care costs in the future, and are therefore investments.

Education should be widely seen as an investment.

Educating young Albertans to be the best and brightest, and to give each of them a chance to make a life and living, is essential.

That is why we should protect investments in education, but make sure that we are seeing a suitable return, such as improvement in graduation rates, math and science testing, and literacy rates.

Businesses hate bureaucracy — it is often slow, inefficient and cumbersome. Regulatory processes are often far too lengthy, and cause unnecessary delays. Creating more processes for business to go through is an expense, not only for business, but for the government. However, adding people and technology to a process to speed it up and make it more efficient is an investment.

There are many more examples. New road and transit infrastructure. Community facilities. New immigrant settlement programs. Job training programs. The absolutely fundamental requirement for agreeing to fund any of these is that they must clearly establish performance measures to be achieved, and the parties must be held responsible for achieving those measures.

By focusing on investments, we can achieve two things: first, we can generate meaningful performance, because we are funding activities based on target outcomes; and second, we can then zero in on the expenses and make those as lean as possible, knowing we are cutting fat and not muscle.

Our fiscal challenge isn’t that we haven’t made investments. We have.

But we have separated the investment and the return, and in some cases, not even cared about the return. That has to end.

Because presently, the fact is that in many areas of government-funded activity, we are investing substantially, but not seeing appropriate returns. We spend more on government services per person than any other province, but we often get middle-of-the-road results. We can do better.

Albertans want investments to keep our economy and quality of life strong.

But we need to make sure we generate a return.

We need to be comfortable holding people, departments and agencies to account for their performance.

Alberta needs to foster a culture of investment and paying for performance.

Good businesses know that they cut something that isn’t making them a return.

Government and government-funded entities need to adhere to that exact kind of standard, otherwise, we will keep wasting money as expenses when they could have been investments.