ON THE MONEY
As Alberta draws closer to the August release of an independent review of the province’s spending, reporter Emma Graney takes a deeper look at the woman leading the process.
Saskatchewan Finance Minister Janice Mackinnon waited anxiously for word from New York, her province’s fiscal fate in the hands of bankers half a continent away.
The province was facing default. It was spring 1993. Saskatchewan’s coffers were so bereft, its credit rating so low, it could no longer borrow money in Canada.
With Premier Roy Romanow at the helm of the new NDP government, Mackinnon was steering her province through stormy waters. Saskatchewan’s fiscal ship needed to find anchor to stay afloat, and it needed to do it fast.
New York bankers gave them one more chance.
The result was a balanced budget in a few short years — and NDP rural support all but vanished after the government shuttered 52 hospitals dotted across the Prairie province.
Twenty-six years later, standing in Edmonton’s legislature building, newly minted Alberta Premier Jason Kenney introduced Mackinnon to reporters.
The former NDP finance minister would head a panel to examine a “critical fiscal situation,” Kenney said, and provide advice on how to get Alberta out of debt.
A POLITICAL CHAMELEON
Mackinnon’s work in Alberta is the latest in a series of fiscal panels she has chaired at the behest of conservative governments.
In 2014, for example, she headed a federal Economic Advisory Council to provide advice on fiscal, economic and financial issues under former prime minister Stephen Harper.
She completed a similar quest for the Progressive Conservative Manitoba government in 2017.
Kenney loves to remind Albertans (and the opposition) that Mackinnon comes to the table with NDP credentials, but her politics were not necessarily a natural fit with that party.
Long-time Regina Leader-post political columnist Murray Mandryk, who covered the Romanow government, scratches his head over why Mackinnon is labelled a New Democrat at all.
In a recent interview, he mused that Mackinnon has always been “very chameleon-like” in her political affiliations.
University of Regina political scientist Jim Farney agrees, placing her closer to a right-wing Liberal, with no time for social or union activists.
The NDP was the party of the elite in the early 1990s, Farney explained in a recent interview.
For anyone with a desire to get into politics, the two choices were the NDP or the PC party under Grant Devine “which was being torn apart by scandal, and was a bunch of cowboys to start with.”
“Nobody has ever described Janice Mackinnon as a cowboy ... so of course the NDP starts to look like a good option if you’re at all flexible in terms of your allegiances,” he said.
To Farney, Mackinnon’s appointment to Alberta’s fiscal panel as a former New Democrat was a convenient shoulder-tap for Kenney.
He also thinks there’s something of a parallel between Alberta’s current oil woes and Saskatchewan’s farm crisis of the 1980s and ‘90s: Technology, foreign competition and government policy intersecting to spark rapid, sector-wide change.
“The question is, how does a government that’s very dependent on a sector change with it? That’s something Alberta needs to wrap its head around, and Mackinnon, to some extent, did that here back then.”
Mackinnon declined an interview for this piece, but said in an email statement it would be a “huge mistake” to compare Saskatchewan’s finances in the early 1990s with Alberta’s balance sheet today.
Indeed, Saskatchewan at the time was close to bankruptcy, with Ottawa scrambling to develop a contingency plan should the worst be realized.
The question is, how does a government that’s very dependent on a sector change with it? That’s something Alberta needs to wrap its head around.
UNDERSTANDING 1990S SASKATCHEWAN
When the NDP took power from Progressive Conservatives in the 1991 Saskatchewan election, the province was teetering on the edge of a fiscal cliff.
Its credit rating was a woeful BBB and financiers were steering clear after the previous Tory government racked up $10 billion in debt in less than a decade.
Then-premier Romanow remembers his swearing-in, when the lieutenant-governor took him aside and quietly urged him to pass a budget as soon as possible, explaining the province was paying its bills via a series of short-term special warrants.
Speaking to Postmedia from his Saskatchewan home, Romanow recalled it as a time of dire fiscal straits, with the deficit interest payment one of the top budget lines.
“We had a problem on our hands ... and we had to tackle it head-on,” he said.
“We were under very, very serious pressure by the (federal) Mulroney government to act because there was considerable fear that Saskatchewan might fall into default, which would cause chaos — or at least a lot of consternation about the financing of various governments in Canada, let alone the reputation of the country.”
The new government announced Saskatchewan’s looming billion-dollar deficit just days before the 1991 NDP convention, hoping to convince grassroots supporters why tough decisions were necessary. It touted as proof of its fiscal rectitude a 10-per-cent cabinet minister pay cut and the closure of international trade offices in Hong Kong and Minneapolis.
Like Kenney’s current approach, Romanow’s next step was to appoint an independent commission to dive into the provincial books. It would undertake a thorough review of where the money went, outline the new government’s options and recommend a course of action.
In her 2003 book Minding the Public Purse, Mackinnon writes the panel was fundamental in garnering public support for the tough choices ahead, and “reflected the need to establish credibility with a cynical electorate.”
Romanow called the independent review “critical.”
“We needed to do that, because if we didn’t, the fear we had was that the public would say, ‘This is an NDP political stunt to try and throw mud at the former government,’ which it wasn’t,” he said.
In essence, it built trust ahead of controversial decisions.
THE FALLOUT
The resulting budget pulled no punches. It closed 52 rural hospitals, ended the children’s dental plan and universal prescription drug program, and slashed funding to schools, hospitals, universities and local governments by anywhere from five to 13 per cent.
While some business sectors like manufacturing and processing received tax reductions, the provincial sales tax increased from eight to nine per cent and the gas tax by two cents per litre.
It was a tough pill to swallow for residents and the government; Mackinnon notes in her book she “felt heartsick at some of the choices.”
Although Mackinnon ended up presenting the budget, she was something of a last-minute appointment. The man who penned the tough measures was Mackinnon’s predecessor Ed Tchorzewski; she took the reins only after a stressed and emotionally gutted Tchorzewski was struck with shingles and resigned from cabinet.
The 1993 budget was “a time of considerable controversy,” said Leader-post columnist Mandryk, who believes the rural hospital closures were “probably the single-most controversial thing the Romanow government ever did.”
The reaction? “Absolute venom.”
“People were protesting on the steps of the legislature for months,” he said, adding lack of supports in rural Saskatchewan still comes up to this day.
TRANSLATING TO ALBERTA
In an email, Mackinnon remembered the cuts in her 1993 budget as “difficult, even draconian decisions, like cancelling the children’s dental plan.”
Alberta isn’t facing the same reality, she said, but is “acting early to avoid a fiscal crisis and the need for draconian cuts.”
“Most important, Alberta spends more than other provinces so has room to restructure programs and reduce spending,” she said.
One can get an idea about where the fiscal review panel could land by flipping through Mackinnon’s book and various research papers.
In a 2017 paper she co-authored with Calgary economist Jack Mintz, they made a case for lower public sector wages, better procurement practices and more effective program delivery.
Health care is another area where Albertans can expect the panel to recommend changes, if Mackinnon’s past research is anything to go by.
Take her 2004 paper in the Canadian Medical Association Journal, in which she stressed the need to address “inefficient” and “unsustainable” health care.
“What is required is an open-minded discussion of change, devoid of the standard rhetoric that attacks new ideas as ‘taxing the sick’ or ‘privatizing the system,’” she wrote.
In 2013, Mackinnon argued in a study commissioned by conservative think tank the Macdonald-laurier Institute that Canada’s health-care system needed a fundamental restructuring, and floated co-payments and more private clinics.
It’s worth noting that Mackinnon and Kenney both stressed Alberta’s current fiscal review panel won’t look at revenues.
That means oil royalties, income taxes and all the other ways the government rakes in cash aren’t up for discussion, nor is the impact of the UCP’S decision to cut the carbon tax and reduce business taxes.
Instead, Kenney will wait until 2021-22 to form a panel to examine Alberta’s optimal tax structure.
For now, Albertans will have to wait to see the implications of Mackinnon and her team’s work. From finance to education, health and community services, ministers have repeatedly said we won’t know more until the fall.
“I think Janice will do an important job and make an excellent contribution to getting a balanced picture of the gravity of the situation in Alberta and hopefully to identify the viable options to the premier and the government,” Romanow said.
“It will be up to the government to make the right choices ... and, more importantly, to follow their discipline.”
What is required is an open-minded discussion of change, devoid of the standard rhetoric that attacks new ideas as ‘taxing the sick’ or ‘privatizing the system.’