1982 was a pivotal year for Alberta as the twin effects of a world recession and falling oil investment forced Alberta policy-makers to pull out all the stops. Western separatism was a worry for Peter Lougheed when Gordon Kessler of the Western Canada Concept party won a February 1982 by-election in the rural constituency of Olds-Didsbury.
This was also a time for budgetary largesse. In a 2011 article in Policy Options, economists Herb Emery and Ron Kneebone:
Provincial support for the industry included a $5.4-billion program, introduced in 1982, consisting of royalty reductions and grants designed to increase the flow of revenue to the industry. In the same year the federal government would supplement this effort with its own $2-billion assistance plan. Measured in 2008 dollars, these two support programs were worth $17.2 billion, an amount considerably larger than the bailout offered to GM and Chrysler by the federal and Ontario governments in late 2008.
On 18 March 1982, Treasurer Lou Hyndman delivered what would become an election budget. In his address he noted that the economic conditions had changed but they were not as grim as the conditions faced by Alberta’s economy today.
In 1981, Alberta’ s economy moved ahead surprisingly well, despite high interest rates and the damage to the oil and natural gas industry by the Ottawa energy proposals of October 28, 1980. Real gross domestic product advanced by 4 to 5 per cent; investment grew by 22 to 23 per cent; average weekly earnings increased by 14.4 per cent, compared to an inflation rate of 12.9 per cent; and 61,000 new jobs were created. This solid performance stemmed from robust activity in petrochemicals, coal mining, agriculture, tourism, and research. The increasingly diversified nature of the maturing Alberta economy was clearly evident. (Hansard, 18 March 1982, p. 209)
And yet, oil and gas drilling activity were down to 1979 levels with only 302 rigs working, down from 375 in 1980. Hyndman went on to point out that:
No other province in Canada matches the comprehensive range of health, educational, social, recreational, police, and other services available in Alberta. In 1980-81, per capita expenditure in Alberta was $3,150 compared to $2,400 in British Columbia, about $2,500 in Saskatchewan, and $2,000 in Ontario. (Hansard, 18 March 1982, p. 211)
Included in the budget was a “massive” capital investment of $2.1 billion. Hyndman did warn legislators that average provincial tax rates would not be enough to cover future budgetary deficits if expenditure increases continue to outstrip revenue growth. On top of the expenditure largesse and low taxes was sprinkled a major enrichment of the Alberta Royalty Tax Credit which doubled the credit from 25 per cent of royalties to 50 per cent.
In summarizing the overall budgetary picture, Hyndman stated:
In planning ahead, Albertans must realize that more than one- half of Alberta’ s budget is now paid from depleting natural resource revenue at a time when conventional oil reserves are declining every day.
In 1982-83, total budgetary expenditure will rise by 30 per cent over the comparable 1981-82 estimates to $8,719 billion. Budgetary revenue will rise by 25 per cent over the comparable estimates of last year to $7,961 billion.
I estimate a budgetary deficit of $758 million in ’82-83. It will be covered by further drawing down the rapidly shrinking accumulated surplus in the General Revenue Fund. (Hansard, 18 March 1982, p. 217)
In this memorandum from the Deputy Provincial Treasurer A.F. “Chip” Collins to Treasurer Lou Hyndman, attention focussed on an exploding government budget. Attention was paid particularly to the size of the public sector “Manpower” workforce. This sensitivity could have been a result of the rising concerns of a “slowing” provincial economy in the wake of lower oil prices and cancellation of major capital projects. The rise in the proposed capital spending budget was consistent with the orthodox Keynesian fiscal policy to make up for the lack of private sector investment.
The PDF of the heavily marked up memo is produced below.
FROM: Deputy Provincial Treasurer FILE: B-5010-4
434 Terrace Building
TO: Hon. Lou Hyndman DATE: 22-Sept-81
Provincial Treasurer
323 Legislature Building TELEPHONE: 7-4106
SUBJECT: 1982-83 Preliminary Expenditure and Manpower Review
As a first look at departmental budget submissions for 1982-83, we have prepared the following brief overview in advance of the Cabinet Retreat. A more extensive report is being prepared for the Priorities Committee- Global Budget Review Meeting scheduled for 16-Oct-81.
Total Government Summary- Voted Appropriations
(reference tables 1,2, 3, and 4 attached)
| 1981-82 Comparable Estimates ($000) | 1982-84 Departmental Requests ($000) | % Increase Over 1981-82 Estimates % | $ Increase Over 1981-82 Estimates ($000) | |
| Operating | 5,051,307 | 6,478,548 | 28.3 | 1,427,241 |
| Capital | 1,604,984 | 2,813,939 | 75.3 | 1,208,955 |
| Total | 6,656,291 | 9,292,487 | 39.7 | 2,636,196 |
| Positions | 33,282 | 36,362 | 9.3 | 3,080 |
| Man-Years | 36,750.5 | 40,273.8 | 9.6 | 3,523 |
Our initial reaction to these figures is that we may be facing a serious problem this year in dealing with requested increases that are significantly larger than in the past three or four years. The following chart shows the percentage increases that departments have requested at the beginning of the budget cycle in each of the last four years, compared with the final amount that was approved at the end of each budget cycle.
| Requested % Increase at Beginning of Budget Cycle | Approved % Increase at End of Budget Cycle | |
| % | % | |
| 1982-83 | 30.7 | ? |
| 1981-82 | 26.6 | 23.9 |
| 1980-81 | 26.5 | 17.4 |
| 1979-80 | 23.2 | 19.7 |
| 1978-79 | 20.6 | 14.6 |
If the starting point of the detailed Treasury budget review has to contend with a total increase of 39.7%, we can anticipate a very large number of variances, notwithstanding the forewarning you gave in your 29-Jun-81 memorandum to all ministers, that Priorities Committee will not accept such a situation. It would appear that most departments must be directed to reconsider their 1982-83 budget requests with a view to effecting significant reductions. In order to allow us an opportunity to adequately review these revised submissions, such a direction must be made without delay. You may want to raise this matter at the Cabinet Retreat this week.
Signed
` A.F. Collins
gs/
Att.
Sept
Source: Provincial Archives of Alberta, PR1986.0245 (Hyndman Papers) Box #45, File 639