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Thank you very much, John (Chomiak), for that kind introduction.

Ladies and gentlemen, I appreciate the chance to address so many dedicated Rotarians.

There are very few non-profits in our province that have the sterling reputation and the longevity of the Rotary Club of Edmonton.

This club was the wellspring of 19 other clubs in the Edmonton area.

Next year marks a century of service to this city you love.

Almost 100 years’ worth of initiatives in every corner of our capital city that reflect your selflessness and service.

Your legacy projects and fundraising make a difference where it counts most.

So I start by saluting the rotary club.

In making these efforts, you uphold some of Albertans’ oldest values — care and compassion certainly, but also an unshakeable refusal to be daunted or intimidated by challenges that we face from time to time.

You refuse to settle for what is easy. And you dedicate yourselves to doing what is right, what is beneficial, through service to others.

I admire Rotarians for choosing to walk this path and for perseverance of staying on it.

Good intentions are no more than first steps down a road.  You know intentions alone are not enough to take you very far.

Perseverance requires a willingness to make sacrifices. It insists on discipline in all weather—good and bad.

These are the qualities which enable the Rotary Club to remain a force for good here n Edmonton.

Fortunately these qualities are widespread in Alberta, where they have driven a history of accomplishment.

Alberta is Canada’s economic engine, we are a world leader in sustainable resource development and home to an enviable quality of life, one that increases as new settlers and new immigrants arrive and are anxious to experience that quality of life for themselves.

All of these factors are the result of Albertans’ hard work.

Like Rotarians, the people of this province are tough, resilient they are and unafraid of the sheer effort success requires.

Those attitudes are entrenched in our culture as Albertans. That is who we are, and I don’t think there are many people in this room that would disagree with that.

And with Alberta caught up in its greatest fiscal challenge in generations, those attitudes and the values on which they are based are more important than ever.

Low-price environment

By now, everyone is aware that the province is struggling with a sharp decline in public revenues.

However, I find that a comprehension of the true scope of the problem is sometimes hard for people to grasp.

If you would bear with me for a moment, I would like to set the record straight about what we are dealing with.

The most immediate difficulty is that oil prices have collapsed — not just in Alberta but worldwide.

It stems back from overproduction on the part of the OPEC cartel, notably Saudi Arabia, has slashed prices by more than 50 percent, compared to what they were a year ago.

In the span of a few months, since September, which was when I was sworn in as Premier as a matter of fact, we have seen nearly one-fifth of Alberta’s revenues evaporate, not deteriorate or weaken, but disappear.

Government is looking at a shortfall of up to $7 billion for the fiscal year that begins on April 1.

A $7 billion shortfall is the equivalent of the entire education budget, or in another context, it would be health expenses from now to roughly the end of the summer.

And so discussions about what to do are ongoing. And I have wanted frank and honest discussion in our province as this is something that we will all have to deal with and be measured by.

I have heard many people ask if we need to do anything at all.

Alberta has been through commodity price cycles before.

So why not wait for prices to rebound, as they inevitably always do? This is a fair question.

And the answer is that prices are not on the cusp of recovery. This has been steeper and this will be longer than anything we’ve seen in this province for some time.

We simply cannot afford to do nothing.

There is not a single energy expert in the world, not a single financial analyst that we've talked to, who thinks oil prices are going to bounce back any time soon.

People that are suggesting that to you, are simply wrong.

In the new fiscal year, oil is forecast to average less than $65 per barrel — leading to that $7 billion hole in the budget.

Things should improve marginally in the following fiscal year. Oil is expected to hover around the $70 per barrel range, that leaves us with a $6 billion deficit in Alberta’s finances

Prices might stabilize the year after that, although the consensus is that prices in the vicinity of $80 per barrel is the best we can hope for. Even at that rate, Alberta will confront a $5 billion ongoing deficit, year after year after year.

So we anticipate a low-price environment continuing, to be certain, for at least three budget cycles.

Add up those deficits and for Alberta, the cost of doing nothing amounts to almost $20 billion.

Falling back on the province’s financial resources is not an option either.

At the prices that were talking about and the built in deficit that we now have in the AB gov’t we would burn through the contingency fund in five months. We would then move onto the Heritage fund and burn through the entirety of the Heritage fund in just 2 years.

We would then have no savings, we would then have dissipated the savings that have taken 50 years for this province to accumulate and we would then rack up debt.

That is not smart. I do not advocate this as a policy. That is not even remotely rational to sit back and do nothing.

So Government must act. Albertans’ futures, their jobs, communities and infrastructure, depend on a robust and a shrewd response.

I have heard quite a few proposals. But here too, I want to emphasize that the issue is complex. I welcome everyone’s point of views on this.

Deficits this size are not easily solved. This is not a question of curing it with the government’s procurement policies or buying fewer paperclips.

We could, in fact, get rid of every civil servant without filling in the hole in the province’s finances. And it would not come to $7 billion dollars a year ladies and gentleman.

That is the scope of the challenge of what we are facing.

I say this not to be negative in any way but to ensure Albertans are fully aware of the scale of the challenge that we are talking about

And the reason is that low oil prices, dramatic though they are, do not describe the full

I am immensely positive as an Albertans that we will get through this and I will describe to you some of what we need to do. I’m confident and I believe in this province but we need to enter this with an appreciation of the sheer scale of the challenge that we face.

Cracks in the foundations

The cracks in Alberta’s fiscal foundations run deeper than is generally acknowledged.

Yes, we have a revenue problem.

But we also have a spending problem.

….It has been overlooked for too long.

….It has spread to every branch of the public sector.

Let me tell you, we had a pretty good thing going in this province.

We had the best of everything — the most generously funded public services, the lowest taxes and plenty of oil money until now to underwrite all our dreams.

Unfortunately, that system was flawed, and it was flawed from the start.

We succeeded in creating some of the most expensive public services in Canada, but failed to establish stable methods of paying for them.

As a result, we have run up public debt and siphoned non-renewable resource revenues from future generations into covering the cost of services of this generation.

Frankly, as Albertans we have made a habit of living beyond our means.

You may have heard about a recent report about this very topic about a week ago from the Fraser Institute.

The report shows that over the past decade, program spending outpaced population growth plus the rate of inflation.

The most obvious example of that you could look at healthcare spending, it has increased in 10 years from 8 billion dollars to close to 18 billion, an annual increase of 7.4% a year. The population of Alberta has increased by 25%, healthcare budget has doubled, gone up by 100% in that exact same time period.

If we had kept spending in line with population plus inflation, as a province we would have saved tens of billions of dollars.

So as the Fraser Institute concludes, previous spending decisions are at least as responsible for our current budget gap as is the oil price collapse.

I agree with them. The statistics that are cited in this report are accurate.

I also agree that a large part of the problem is wages - in the ranks of government, health care, education and municipal services. We are all proud, rightfully so of having the country’s hardest-working teachers, doctors, nurses and civil servants.

But we need to recognize that they are also among the highest paid public-sector professionals in Canada, taking home significantly more than the national average.

In fact, Alberta’s public-sector professionals are at or near the top in terms of salaries across the board.

Successive governments have repeatedly approved costly wage agreements over the past 10 years, leaving taxpayers to deal with the consequences of these agreements.

Salaries and benefits now essentially take almost one dollar out of every two dollars the province spends at this point in time.

And over the next three years the most immediate challenge that we face as a government is that baked into the governments financial requirements is 2.6 billion of additional wage increased that we previously negotiated for the nest 3 years.

Government cannot bank on the oil revenues these promises were based on.

So as we cut costs, as we confront population growth pressures and inflation, we will have to begin our calculations from a higher threshold —a new high water mark— to accommodate those obligations.

So I will be blunt: This trend is not sustainable and it never was sustainable. It’s time that we all understood that and recognized it.

It has in fact been an issue in the Canadian federation; it has been raised with me by essentially every premier that I have talked to in the province. Because the other provinces have known that what has been going on in Alberta is not sustainable and they have been unable to keep pace and deal with the consequences of it in their own provinces.

It is unrealistic to expect government expenditures to increase in such an environment.

Difficult decisions are unavoidable. Anything else, frankly, is just not living in the real world.

Labour strategy

I have said repeatedly —and I will say it again today—and it was referred to in an earlier comment, that the government will not ask Albertans to tighten their belts without being prepared to do the same thing first.

We have already demonstrated leadership in this regard.

Together with Cabinet and all MLAs, I have taken a five percent pay cut. So have senior staff in my office, taking a voluntary pay cut.

Our province has a spending problem fuelled by wages and we intend to fix it, but it has to start at the very top.

In that spirit, I will tell you today that government will take a more active role in ensuring that these concerns are addressed.

This is about getting our own house in order and improving how we do business. 

Minister McIver’s office and all of Cabinet have begun to turn our attention to this urgent need.

And it will begin with a collective bargaining process.

Previous government approaches to bargaining have not been consistent. They have been hampered by a lack of foresight and by coherence.

We cannot afford one-off settlements that are based on immediate priorities and immediate pressures.

Regardless of economic conditions, we must be prudent with tax dollars spent.

Falling short of this goal will only increase the pressure in subsequent years.

So in the months ahead, government intends to make its approach to collective bargaining more consistent and more coordinated.

We will speak with a single voice, ever mindful of our duty to safeguard the province’s long-term fiscal health.

This starts with the establishment of a working group led by a senior public servant, Deputy Minister Tim Grant, which will advise government on how to revitalize and modernize the province’s approach to labour negotiations, based on the best practices of other jurisdictions, not what we have done in this province in the past.

Provinces such as British Columbia use unique processes to negotiate collective agreements, which is why the working group will review their approach carefully to develop recommendations for Alberta.

Tim Grant will report back to Minister McIver and myself in four months, but his input into our approach has already begun.

Our relationships with Alberta’s public-sector trade unions will be respectful. We have been clear, we will honour existing agreements.

But going forward, I feel that it is government’s responsibility to put ourselves in the best position to achieve outcomes that are sustainable and fair, both for public sector employees and for taxpayers.

Our ideal is a balanced solution that maintains labour stability and respects the reality of Alberta’s finances.

Most of all, it must ensure as Albertans to continue to receive excellent public services.

The status quo is not sustainable.

And Albertans are best served by both sides adopting a pragmatic, long-term view of what is possible.

We also need to take a fresh look at how we deal with public sector labour disputes in our province.

In light of the recent Supreme Court decision relating on the right to strike, and in line with our government’s desire for fair and supportive public sector labour relations…

…I believe it is time to review the provincial framework for dispute resolution.

We must keep legislation relevant, efficient and effective.

This spring we will launch talks with public-sector employers and their respective unions about how a different approach, including an essential services model similar to that in place in other provinces, and whether that might be appropriate for Alberta.

Under this standard, unionized staff and employers may resort to strikes or lockouts, but essential services must continue operating while any work stoppage is underway.

Any legislation that we adopt will be a made-in-Alberta model that draws from what we learn through consultation, including input from public sector workers and the unions that represent them. The supreme court has made that clear that is an obligation that all provinces have in this country.

Change has to be informed by mutual understanding and we are prepared to listen to our partners in the public sector, and to be prepared to take the time to get this right.

I know that they are just as serious as we are about doing the right thing for Albertans.

Culture shifts

I will not pretend that progress on the labour front —or on any one front— will be enough.

We cannot deal with the significant circumstances that this province is in like this in a single year.

And economists have been advising us not to move that fast anyway.

Filling the gap in our budget in one shot would mean such drastic cuts that the province would sink into recession. And it would leave us completely unable to maintain services, or to protect our most vulnerable citizens in this province.

Getting Alberta back on track is a long-term proposition, and it will take several years.

This is more than a matter of policymaking. It requires a culture shift, a fundamental rethink of public finances and the economy.

This much is clear. We need to get off the oil rollercoaster. Albertans tell me this every day, everywhere I go, and they are right.

They agree that being waiting on OPEC to decide if we can build new schools is no solution for Alberta.

Resource revenues can help us remain competitive, but we have become addicted to them.

It is not smart nor is it fair, because those revenues don’t belong entirely to us in this generation.

They belong to our children and grandchildren, and generations of Albertans to come.

We should be setting aside some portion of that money aside for them, for future generations.

We must pay our own way, and we must get back to a point where we are spending within our means on what we need, and saving for the future. Surely ladies and gentlemen these are Albertans’ values. I know that they are from what I hear as I criss-cross the province.

Change on this scale can be wrenching. And everyone, every single Albertan will bear part of the pain; there is no solution other than that.

But this province has been through culture shifts before. And there is nothing tougher than an Albertan.

I think we often forget that Albertans are actually no strangers to re-invention. History has forced us to master this particular art.

Ninety years ago, our economy ran on wheat. It comprised 60 percent of prairie crops and the bulk of that was exported.

However, by 1930, wheat surpluses from other nations caused a glut in international grain markets.

The Great Depression and drought conditions made a bad situation worse. But it is worth noting that Alberta was dealing with a state of affairs very similar to the present.

We had become dangerously dependent on a single commodity and a global oversupply caused a price collapse of global prices.

And Albertans fell back —then as now— on our longstanding values of innovation, of courage and of resilience.

We were forced to develop new techniques to improve production and reduce costs…expand market access…and find new ways to diversify the economy of Alberta .

That is how our modern economy was born. And how it will be sustained going forward, as once again our province moves to redefine itself.

Conclusion

Innovation, courage, and resilience — those qualities that I think are the foundation of Albertans’ identity.

Like Rotarians, we persevere in all weather and against all odds.

We are not a people prone to giving up. We handle the most severe tests of our character bravely and wisely.

This is what it will take to solve the current budgetary difficulties in this province.

And at the end of the month, my government will bring forward a 10-year plan designed to achieve exactly that.

Our plan will be measured and balanced. It will lay out in detail what the problems are and what we are facing and it will take the decisive actions we will take to correct them.

Every Albertan will know where we are, where we are going and how we will get there. In detail.

We will bring forward a plan – and we will stick to it, and it will be balanced

We are resolved – and we will all do our parts.

We will take action in a way that protects jobs, our vital services and our Alberta advantage.

We will act prudently and decisively but with compassion for those  in this province who need government services.

We will be sensitive to the impacts
of the decisions we make on an already vulnerable economy.

We will deal honestly and fairly with shared and fundamental challenges.

When Albertans face a challenge,
we stand together and tackle it head-on.

And that’s what people expect of their government at this point and time.

And together, we will strengthen the foundation of this province and we will build an even brighter future – with the same determination, confidence, and vision that Albertans have always shown. 

And mark my words, ladies and gentlemen; we will emerge from this on the other side even stronger, and tougher than we are now.

Thank you.