Albertans worried about whether their government understands the dire situation facing the province will be disheartened by Tuesday’s Speech from the Throne.

While the speech trumpeted that “prudent fiscal management has positioned Alberta well,” the truth is that recent fiscal management has been anything but prudent. Massive increases in government spending financed by volatile revenues will almost certainly leave the province in a significant deficit position. While raiding the $7 billion Sustainability Fund might temporarily help close the gap, it will not solve the larger problems.

The unfortunate reality is that Alberta has turned its back on the policies that created the foundation of its recent prosperity: limited government and lower taxes. Profligate government spending lies at the heart of this departure.

In its first budget, the Stelmach government clearly stated, “We just can’t keep raising our spending at these levels—even if strong energy prices and economic growth continue. The facts are clear. Hiking our operating spending by 10 per cent - as we’re doing this year - can’t continue.”

But continue they did. Last year’s budget (Stelmach’s second) increased operating spending by another 9.7 per cent (2008/09), again greater than the projected rate of economic growth. In addition, the government proposed increases in operating spending that exceed projected economic growth for the following two years (2009/10 and 2010/11).

Exactly how is this prudent?

The ramp-up in spending over the past two years follows dramatic spending increases in the later Klein years. Between 1995/96 (the end of strong fiscal restraint in Alberta) and 2006/07, program government expenditures in Alberta grew 174 per cent, from $10.7 billion to $29.5 billion.

Had both Klein and Stelmach exercised fiscal prudence and held spending growth to the rate needed to keep up with inflation and population growth, Alberta’s expenditures would have totalled just $19.8 billion this year (2008/09) instead of the projected $37.6 billion -- a difference of $17.8 billion for 2008/09 alone. For perspective, consider that Alberta is expected to raise a total of $8.8 billion through personal income taxes and $3.8 billion corporate taxes in 2008/09.

One of the main results of the unabated increases in spending has been a dearth of meaningful tax relief. The absence of tax relief in Alberta has allowed other provinces, particularly neighbouring Saskatchewan and British Columbia, to substantially close the tax gap.

For instance, B.C. has aggressively reduced its personal income taxes to close the gap with Alberta. Since 2001, B.C. has reduced its top personal income tax rate by 25 per cent while Alberta has maintained its status quo. B.C. now has the lowest personal income tax for individuals earning up to $108,000 of any Canadian province, including Alberta.

Both Saskatchewan and B.C. have aggressively reduced the business tax gap with Alberta, and taken away Alberta’s significant advantage of being the only province without a corporate capital tax. While Alberta has reduced its corporate income tax, both Saskatchewan and British Columbia have followed suit.

The benefits for both the B.C. and Saskatchewan economies has been obvious, while the relative attractiveness of Alberta’s economic climate has waned. In fact, economic forecasts show these economies will outperform Alberta’s over the next two years.

The time has come for the Alberta government to seize the opportunity to make the tough choices needed in these difficult economic times. That is, it should follow the lead of Albertan families and trim spending.

Meaningful spending reductions coupled with program reform would provide the resources to strengthen Alberta’s diminishing tax advantage and re-assert a clear focus on the Alberta Advantage - the combination of Canada’s lowest tax rates, smallest government, and most attractive investment climate.

Of course, Alberta’s government expenditures purchase a number of important services for Albertans. But it is critical to remember that they do not do so efficiently.

For example, waiting lists for health care now are much longer than they were in the mid-1990s in spite of large increases in health expenditures. In fact, Alberta’s health care system ranks among the most expensive universal access health insurance programs in the developed world, while wait times for health care in Alberta rank among the developed world’s worst.

More broadly, a recent study found that there is approximately 25 per cent waste in Canada’s public sector as a whole (federal and provincial). There is little reason to expect that Alberta would deviate from the national norm.

Clearly, there is room to cut spending without reducing benefits.

While Tuesday’s Speech from the Throne was boldly entitled “Facing the Future with Confidence,” Albertans have reason to worry. More spending and government intervention will only increase the risk of sustained deficits and delay a much needed re-focus on the Alberta Advantage. The time has come to reverse course.