Alberta Premier Jason Kenney is not a Wexiteer. He has said as much out loud. To quell separatist sentiment by pursuing its most extreme aim would be a fool's errand. But the questions to be studied by Kenney's new "Fair Deal Panel" suggest he has no problem bringing Alberta as close to "nation within Canada" status as it can get.
Of these nine questions, the prospect of an Alberta Pension Plan (APP), and the consequent withdrawal from the Canada Pension Plan (CPP), is viewed as a more serious idea than the others. After all, an administrator is already present in the form of the Alberta Investment Management Corporation (AIMCo), which manages pensions for Alberta's public-sector workforce. After AIMCo takes over several other funds, as the province intends, it will manage $115 billion in assets. An extra $40 billion in premiums from Albertans currently managed by the CPP would bring that up to $145 billion. Besides, according to Kenney, the rest of Canada has had it coming:
We've never faced a more hostile situation coming from the central government. And some of the provinces who have benefited enormously from the wealth generated in Alberta are now saying they are going to do everything they can to stand in the way of us exporting our energy. This is a new moment in our history.
Of course, the higher contributions from Albertans to the CPP and other national programs are largely the result of a share of Canada's working-age population described by the Fraser Institute as "disproportionate." It used to be a point of pride that so many young Canadian workers flocked to Alberta to seek their fortune. Now it's a political cudgel.
But let's leave aside the mathematical excuses for a moment. Let's also leave aside the concerns about initial costs, the boom-and-bust atmosphere for provincial payrolls, and the legal and political feasibility of the withdrawal under the terms of the CPP Act. These are important factors, but another one outweighs them all: What would an APP investment policy look like?
In the famous "firewall letter" of January 2001, the six Albertan signatories asked then-Premier Ralph Klein why their province couldn't make like Quebec, which had founded its own provincial plan, the Caisse de depot et Placement du Québec (CDPQ), 36 years prior. On December 31, 2018, the CDPQ posted a five-year return of 8.4 percent. This is quite an impressive number, especially since the CDPQ has been mandated since 2015 to "ease the financial burden" of infrastructure spending by overseeing "the planning and financing phases, execution and operation" of a raft of projects.
The return becomes less impressive when you consider that it was matched over the same time period by the iShares Core S&P 500 ETF, the second-largest exchange-traded fund on the market by assets under management. The fee on shares of this ETF is 0.11 percent far below the cost of being so deeply involved in building hospitals, wind farms, and public transit systems. The legislation creating the CDPQ's infrastructure subsidiary asserted that the fund would act with full independence subject to a rule forbidding it from investing more than "70% of its total assets in units of indexed funds and in common shares." What was at first simply a provincial pension fund, there first and foremost to benefit Quebec's workforce after retirement, is now that and a surrogate infrastructure bank.
The mentality that might lead Alberta to run the APP in a similar fashion is already in place. Provincial revenues fluctuate based on oil and gas royalties. The government steadfastly refuses to create a more reliable revenue stream, such as a provincial sales tax. They don't trust the federal government to provide them with financial or political support. If they have a premium pool entirely to themselves, they can direct AIMCo to adopt an economic development mandate, in the same breath as they insist that the fund is retaining its independence.
If they are truly committed to striking a "fair deal" for Alberta pensioners, the government must commit from the outset to leave AIMCo free to pursue maximum returns for its beneficiaries, regardless of asset class, sector, or geography. Exploiting ostensibly arm's-length processes for economic purposes is a classic Ottawa move. Kenney's new Alberta would do well not to imitate it.
Photo Credit: CBC News
Written by Jess Morgan
