6How I Became Finance Minister (2009)

Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried.

—Winston Churchill

The Klein Legacy

From 2007 through 2009, my priorities were to address the challenges and opportunities I now had as the new minister of sustainable resources development—the subject of the previous chapter. For Ed Stelmach, the number one priority was to ensure that he—that we—would win the provincial election scheduled for 2008. At the outset, this appeared quite doable.

Thanks to Ralph Klein, the government Ed Stelmach inherited was not only debt free, but also had a new $2.5 billion “Sustainability Fund” to cover off any short-term deficits in a low revenue year. To ensure that future Alberta governments didn’t make the same mistakes as the Getty years, the Klein government also enacted a new balanced budget law that made deficits illegal.

The Klein government also terminated or wound down the dozens of failed “economic diversification” programs inherited from the Lougheed and Getty era.¹ Klein also set in motion reforms that took responsibility for managing the Alberta Heritage Fund away from government ministers and vested it in an independent and professional management team—the Alberta Investment Management Corporation (AIMCo).²

The Klein Government commissioned a study on how to get Alberta public finances back on a stable, long-term track. That report, Moving from Good to Great: Enhancing Alberta’s Fiscal Framework, highlighted the structural risks inherent in how Alberta was spending its oil and gas royalties and associated energy revenues.

The commission also recognizes the increasingly important need to reduce our province’s reliance on non-renewable resource revenues. … A new fiscal framework should provide for a gradual but sustained reduction in our reliance on natural resource revenues and a focused attempt to build financial and other strategic assets to maintain and improve the Alberta Advantage.³

In response, the government amended the Fiscal Responsibility Act in 2002 to allow only the first $3.5 billion of resource revenues to go into general revenues, and directed the rest, if any, to the new Sustainability Fund (capped at $2.5 billion), which would be available to supplement a shortfall if energy revenues did not reach $3.5 billion in a future year. The primary purpose of these amendments was to reduce GOA reliance on non-renewable energy revenues and to escape the “stop-and-go” capital-spending pattern of recent years.

If Stelmach had followed this new fiscal road map, his premiership would have ended more happily. But in his defence, the failure to do this started even before he became premier.

When I first joined the government in 2005, the prices of both natural gas and oil were hitting historic highs, and so were the GOA’s resource revenues. As shown in Table 1, energy revenues jumped from the $7 billion/year range to $14.3 billion in 2005 and $12.3 billion in 2006. For Budgets 2005 and 2006, GOA spending increased an average of 10 percent a year, a rate that clearly was not sustainable. Shirley McClellan was treasurer and deputy premier—and she would keep warning caucus that we could not continue at this rate. But continue we did.

As noted above, the government amended the Fiscal Responsibility Act to allow only the first $3.5 billion of resource revenues to go into general revenues, and directed the rest, if any, to the new Sustainability Fund. No sooner had we put these new rules in place than we began to break them. Or rather, to change them. In 2004 (before I had even joined caucus), the government legislatively amended the amount of resource revenues that could be directed to general revenues from the original $3.5 billion to $4 billion. Once I joined government, we did this twice more—raising the limit to $4.75 billion in 2005 and to $5.3 billion in 2006. At the same time, the “rules” governing what to do with resource revenues in excess of $2.5 billion mandated for the Sustainability Fund were soft and vague. “Surplus funds” could be directed into additional savings, but they could also be directed into the Capital Account or into “balance sheet improvements,” which turned out to mean just more program spending.

In the last Klein budget, 2006, GOA energy revenues were $12.3 billion. $5.3 billion was used for budgeting and $7 billion was transferred to the Sustainability Fund. From the latter, $4.8 billion was transferred to the Capital Account; and $900 million was spent on disasters (drought relief, forest fires, pine beetle) and natural gas rebates. All that was left for savings was $1.2 billion. In short, during its last two years, the Klein government failed to follow the new budgeting and spending rules it had just adopted. Would it be different under Stelmach?

I neither liked nor approved of this overspending. But as a new backbencher, I could do little about it. I was also inclined to cut Klein some slack. His government’s sharp budget cuts in the 1990s had subjected him and his cabinet members to strong protests, some that got way too personal. Maybe it was understandable that with the Getty debt now paid off, Klein, ever the populist, wanted to go out as a more popular premier. But after the leadership race—and all the candidates’ commitments to fiscal responsibility—I expected the Stelmach government to follow the new rules. This did not happen.

Stelmach: Buying the 2008 Election

In 2007 and 2008, resource revenues remained high. As before, spending followed. While officially only $3.5 billion in resource revenues were supposed to be spent annually, the true amount was much higher. In Stelmach’s first budget, virtually every resource dollar was spent. The explanation was not hard to find.

Stelmach wasted no time keeping his campaign promises to increase GOA program and capital spending. His first budget—2007—saw a $4 billion spending increase, and the next—2008, an election year budget—saw another $3 billion increase. In 2008–9, when energy revenues were $11.9 billion, over $10 billion was spent on operating and capital, double the $5.3 billion “limit.”⁴ Much of this was driven by generous contract settlements with the public sector unions. Stelmach apparently wanted to pay back the “two-minute Tory” supporters who had helped him win the second round of voting in the 2006 PC leadership race.

Between 2008 and 2012, the average weekly earnings of all Alberta provincial public sector employees—29,387 in number—increased by 17 percent. The sweetest deal was given to the Alberta Teachers’ Association (ATA). With the ATA threatening a province-wide teachers’ strike to coincide with the 2008 provincial election, Stelmach and Minister of Education Ron Liepert gave the ATA a five-year contract, conveniently taking us beyond not just the 2008 election but also the 2012 election.⁵ The contract guaranteed annual salary increases equal to the provincial “weekly wage index,” which, once the 2008 recession hit, was substantially more than inflation. On top of that, the GOA assumed the $2.1 billion unfunded liability in the ATA’s pension fund and made a $1,500 lump-sum payment to each teacher.⁶ No wonder so many teachers voted PC in the 2008 election!

I had one positive influence on Budget 2008. I successfully argued for increasing Alberta’s tax credit for charitable contributions, a policy plank in my 2006 leadership campaign. We raised the provincial tax credit from 12.75 percent to 21 percent, a 60 percent increase that made Alberta number one in Canada in this respect.⁷

Where was all this money going to come from? Stelmach had an answer: from the oil companies. During the course of the PC leadership contest in 2006, all the candidates agreed that given the surging increases in oil prices, it was time to review the royalty rates for the oil sands operations. A decade earlier, when falling bitumen prices threatened to shut down the oil sands, the government had cut royalty rates to help keep the industry afloat. Now, with prices at record highs, it made sense to revisit this arrangement.

As premier, Stelmach went one big step further. He appointed a five-person committee to review the royalty rates on all oil and gas wells in Alberta, not just the oil sands. There were early concerns that that the committee had an anti-industry bias. It was chaired by Bill Hunter, a former executive in the forestry industry, a sector with a long history of poor relations with the oil and gas sector. There was only one member of the committee with personal experience in Alberta’s energy sector. While Minister of Finance Lyle Oberg announced the members of the committee, it was widely known that the five members were hand-picked by the premier’s office.⁸

The meaning of all this became clear at the 2007 Calgary Stampede, when a draft of the report was presented to caucus. The leading slide depicted a “Daddy Warbucks” lookalike labelled as “Big Oil” holding the puppet strings to elected politicians. While this type of negative caricature might be standard at a Liberal or NDP caucus meeting, it shocked many of us who saw the energy sector as the key to Alberta’s prosperity, and a friend of the PC Party.

Three months later—and just five months before the anticipated spring 2008 election—the Stelmach government released the final version of the New Royalty Framework (NRF).⁹ It ignored the oil and gas sector’s private communications that they were willing to accept some modest royalty increases. Instead, the NRF sharply increased royalties and projected a resulting increase of $1.4 billion in royalty revenues by 2010, a 20 percent increase over the current year.¹⁰ In retrospect, this turned out to be a huge miscalculation. Plummeting natural gas prices and the post–2008 recession collapse of oil prices led to a massive drop in royalties by 2010—over $2.5 billion less than 2007. But that was not until 2010.

In the run-up to the 2008 spring election, the New Royalty Framework—named and marketed as “Our Fair Share”—was wildly popular. Stelmach embraced a populist marketing campaign to style the NRF as win-win for all Albertans: “I made a commitment and I delivered. The New Royalty Framework gives future generations of Albertans a fair share from the development of their resources.”¹¹ The “fair share” message worked. It tapped into a latent resentment in many Albertans rooted in the belief that they had not benefited from the energy boom of that decade.

The NRF became the hallmark policy of the Stelmach Government but also led to its ultimate demise. It may have won an additional dozen seats in the 2008 election, but it deeply alienated the oil and gas sector—especially the juniors—many of whom subsequently bankrolled the Wildrose Party in the lead-up to the next provincial election in 2012.

The final pre-election goodie was the cancellation of health care premiums that Alberta had levied since 1969: $1,056 a year for families and $528 for singles. Total savings to Albertans, Minister of Finance Iris Evan crowed, would be $1.3 billion, the equivalent of a 12 percent reduction in personal income tax.¹² Premier Stelmach went out of his way to link the cancellation of health insurance premiums to his NRF:

The time has come for Albertans to enjoy additional direct rewards of our province’s prosperity. This government made a commitment to Albertans to eliminate health care premiums within four years. We said we would do it sooner if we could and that is exactly what we’re doing.¹³

Buoyed by this kind of pre-writ spending and tax cuts, in the March 2008 election, we crushed the opposition parties, winning seventy-two of the eighty-three seats. Predictably, the Conservative gains came mostly in the greater Edmonton area, where the PCs achieved our best results since 1982. The Liberals were reduced to nine MLAs, the New Democrats to two. The lone Wildrose MLA, Paul Hinman, lost his seat in Cardston. The Stelmach “investments” had paid a handsome political dividend!

Several weeks after the election, there was an insightful Calgary Herald column by a then-obscure professor at Mount Royal College, Naheed Nenshi.¹⁴ (For readers not from Alberta, Nenshi went on to become the mayor of Calgary from 2010 to 2021.) The “real losers,” according to Nenshi, were not the Liberals, the Wildrose, or the NDP. The “real losers” were Ted Morton and Jim Dinning, both of whom, he alleged, were waiting in the wings for Stelmach to stumble, ready then to take him down and make a second run at the PC leadership. Factually, Nenshi was simply wrong about me. I had no active plan for a coup d’état. But at another level, he was right. Any hopes I might have had for a quick second chance were dashed. Nenshi was also right about something else. The longer I waited for Stelmach to retire, the more difficult it would become for me to ever lead the PC Party.

Flush from a stunning electoral victory that few would have predicted a year earlier, the Stelmach Tories delivered on all our pre-election promises in Budget 2008. Spending was increased by 11.6 percent over the prior year to a new Alberta record—$37 billion. But revenues were even higher, with a projected surplus of $1.6 billion.

South of the border, the failure of Bear Stearns, a well-established New York investment bank, was an early warning sign of the impending subprime mortgage and credit collapse. But in Alberta, projections for oil and gas prices were at historic highs—$78/barrel oil and $6.75/GJ gas prices. The actual market price of oil in April was an even-higher $118, and would reach $148 by July, before the meltdown of the investment banking industry in September 2008.

Stampede Caucus 2008: Spending $4 Billion That We Did Not Have

Blithely unaware of what was just around the corner, in Alberta the government spending frenzy culminated at the annual July Stampede Caucus—an event where the entire PC Caucus comes to Calgary to serve pancakes to the public in the small park behind McDougall Centre. In those heady days, it was common to mix business with pleasure. After the pancakes were served, an all-day caucus meeting was held at McDougall Centre before most of the caucus headed off to the Stampede grounds for the chuckwagon races and evening show.

Caucus was told that while Budget 2008 had pegged our projected surplus at $1.6 billion, our first-quarter update now projected that this surplus had increased by an eye-popping $8 billion—driven by historically high oil prices and royalties. There was justifiable concern in cabinet that this news would lead to public demands for even further program spending.

These concerns intersected with early efforts to do something about the new reality of global—and especially US—opposition to the continued expansion of the Alberta oil sands. Under Klein, there was little interest in responding to demands for reductions in CO₂ emissions in Alberta. But now the criticisms became too loud to ignore. Concerns about “social licence” and “market access,” terms the Klein cabinet would never have heard of much less used, were now on the table.

To address these concerns, the Stelmach government had undertaken some preliminary policy development around carbon capture and storage (CCS). CCS was a new, unproven, and expensive technology that captures the exhaust gases from coal-fired power plants or refineries and then uses cooling and high pressure to separate out the CO₂. The CO₂ can then be re-injected into underground formations. In spring 2008, the emphasis for the GOA was on “preliminary” and “expensive.”

Notwithstanding this, prior to Stampede Caucus, Minister of Energy Mel Knight had presented cabinet with a plan to invest $2 billion in CCS. The pitch was that we could use the now-projected budget surplus to jump-start the CCS project, thereby pre-empting calls to spend it on other programs.

This caught most of cabinet by surprise, and I was quick to voice my opposition. As a climate-change skeptic, I was opposed to spending this kind of money on carbon reduction. As a fiscal hawk, I was opposed to spending “projected budget surpluses”—money we did not yet even have—on any new projects. Vigorous debate ensued. Eventually, as a compromise measure, I proposed that for every dollar we would spend on CCS, we’d spend an equivalent dollar on expanding public transportation. I argued that taking more cars and trucks off Alberta roads, could reduce our CO₂ emissions in a way that actually improves the lives of everyday Albertans, unlike pumping CO₂ into the ground. This compromise garnered a consensus, and we were told it would be added to the CCS initiative.

It was my understanding that this meant that the new “policy package” would split the proposed $2 billion equally—$1 billion for CCS and $1 billion for new public transit. Suffice it to say that I and others were surprised when we were told the next day in caucus that the GOA would be spending a total of $4 billion on a new carbon reduction strategy—$2 billion each on CCS and public transit, subsequently christened “GreenTRIP.”

This episode captures how easy it was to spend money in the years leading up to the Great Recession, which began in earnest less than two months after this Stampede Caucus. The final irony—or tragedy—in this episode was that by the time GOA books closed on Budget 2008–9, there was no $8.5 billion surplus but rather a deficit of $852 million. In less than seventy-two hours in early July, we had committed to spending $4 billion that we did not yet even have. And, as it turned out, never would have.

Deficits and Debt: Memos to Stelmach and Snelgrove (2008–2009)

In August 2008, I wrote the first of two internal memos to then–President of Treasury Board Lloyd Snelgrove, with copies to Premier Stelmach and Minister of Finance Iris Evans. While I had no way of knowing it at the time, it was these memos that would later lead to my appointment as the new finance minister in January 2010; my subsequent dispute with Stelmach over the severity of the budget cuts I was proposing for Budget 2011; my decision to resign as finance minister in January 2011; and Ed Stelmach’s subsequent resignation as party leader and premier.

It began innocently enough. In the weeks following the 2008 Stampede Caucus, I took some time to read the “Mintz Report”—a recently released report on GOA finances done by a commission chaired by Dr. Jack Mintz, the then-president and CEO of the C.D. Howe Institute in Toronto.¹⁷ I had come to know Jack in 2001, the year I worked as director of policy and research for the (federal) Canadian Alliance Party, and had continued to read his policy opinion pieces in the National Post. The message of the sixty-one-page report was succinct and blunt: “The current fiscal policy (including relatively high rates of spending and low rates of taxation) is unsustainable over the longer term.” The only solution, the report counselled, was a significant and sustained commitment to saving more of current non-renewable resource revenues, with a target of saving $100 billion in the Heritage Fund by 2030.

I was persuaded by the Mintz analysis, particularly the urgent need to start a new savings process NOW, while oil and gas revenues were high and we were running budget surpluses. However, I knew from being a member of Treasury Board that a new, longer-term fiscal plan was not high on our government agenda, so I wrote the memo with the purpose of putting it on the agenda. I will let the letter speak for itself.

The Mintz Report was never brought to either cabinet or caucus for discussion. By the time anyone got around to reading my August 10 memo, the subprime debt, asset-backed securities meltdown was in full collapse, and so were the GOA revenues. As noted above, the Q1 projection of an $8.5 billion surplus for Budget 2008 ended up as an $852 million deficit.

And Budget 2009 looked even bleaker. As introduced in March 2009, it projected revenues to decline by 11 percent, led by resource revenues, which were projected to be $6.4 billion LESS than just the year before. While increases in spending were kept to 3.2 percent, this still translated into a projected deficit of $4.7 billion. After having publicly boasted for years, “Balanced budgets: That’s the rule in Alberta,” we quietly amended the Fiscal Responsibility Act to allow a deficit. Tellingly, two of the big drivers for increased expenditures were higher salaries for teachers (the result of the 2008 pre-election contract) and the $4 billion commitment for CCS and GreenTRIP (made at the 2008 Stampede Caucus)

A small victory for me was that I was finally able to persuade caucus to eliminate the home heating gas rebates that Klein had brought in to help ensure a win in the 2001 provincial election. As a biweekly columnist in the Calgary Herald, I had strongly criticized these rebates when they were first adopted.¹⁸ In 2006, when they were up for renewal, I unsuccessfully argued against them in caucus. The largest beneficiaries were wealthier families who owned larger homes and those who kept their thermostats cranked up too high. I knew, because I represented many of these people who lived in their “McMansions” in my Springbank and Bearspaw constituencies. But by 2009, it was only a token victory. The GOA had already doled out over $2 billion in rebates, and by 2009, with the price of natural gas plummeting, no one qualified for rebates anyhow.

The only bright spot in Budget 2009 was that we could point to the $17 billion we had saved in the Sustainability Fund, and tell Albertans that this “rainy day account” could tide us over for two more years of deficits without falling back into debt. We also promised we would be “back in the black” by 2012, in time for the next election.

By the end of first quarter, the numbers were even worse. Revenues were down another $2.1 billion, thanks to the continuing collapse of natural gas prices. This meant that our projected deficit for the year was now a staggering $6.9 billion. It was against this depressing backdrop that I wrote my second memo to the president of Treasury Board, with copies to the premier and the minister of finance. Again, I will let the letter speak for itself. The tone of this letter was much less polite than the first.

Budget 2010 and the Wildrose Challenge

The following four months were eventful, both inside and outside of caucus. Our massive 2008 electoral coalition was rapidly disintegrating. Unhappiness with the New Royalty Framework had spread beyond the Calgary towers and into the fields and small energy-dependent communities, where thousands of workers were now being laid off. Job losses were compounded by the effects of the global economic recession, which by now had driven the WTI price of oil from $148/barrel down to $75. Rightly or wrongly, Ed Stelmach and the NRF were being blamed for all of this. Suddenly, the Wildrose Party was polling higher than the other opposition parties. On September 14, Wildrose Party leader Paul Hinman won the by-election in Calgary Glenmore, previously a safe PC seat. The PC candidate finished a distant third, even behind the Liberals.

Inside caucus, there was growing unhappiness with our ballooning deficit and the perceived insularity of the Stelmach inner circle. The PC Party’s AGM was scheduled for November 7 in Red Deer, and as required by the party’s constitution, there would be a mandatory leadership review vote. Fanned by media speculation, there were rumours of a caucus revolt, and the prospect that, as with Ralph Klein just three years earlier, the PCs would use the leadership review to dump an increasingly unpopular leader.

The premier’s office clearly sensed these risks. Led by Ron Glen, Stelmach’s chief of staff, they had organized our fall calendar accordingly. A two-day caucus retreat was planned for mid-September, followed by a two-day cabinet retreat the following week. These were intended to allow us to develop some consensus on how best to proceed, and to be able to present a united front when the fall session of the Alberta legislature opened on October 26, and, perhaps more importantly, at the AGM on November 7.

Ron Glen opened the caucus retreat with an overview of the political landscape. Reflecting on our humiliating third place finish in the Calgary-Glenmore by-election a week earlier, Glen told us what we all already knew: that our principal opponent was no longer the Liberal Party but the Wildrose. To thwart this growing threat on our right flank, he continued, we had to deal with two key issues: the budget deficit and health care delivery. What followed was a two-hour open-ended discussion—really a giant venting session—during which almost every member of caucus gave their two cents’ worth of advice.

The gist of the conversation was whether to “stay the course” or change. Policy-wise, these options roughly translated into continue spending or cut spending. By my count, the speakers fell roughly into four equal groups. Led by Ron Liepert’s warning “not to overreact” to our by-election loss, about a quarter urged continued spending on education, health care, seniors, and “the vulnerable.” As Liepert put it, the PCs are a “centre party [and we should not become] a right-of-centre party.”

Another quarter—which included me—stressed the need for serious cuts to program spending to staunch our ballooning deficits and to win back “fiscal conservatives.” Our losses were not just “a perception,” but a reality. Drilling rigs and investment capital were leaving our province, and disillusioned conservatives were leaving our party. The rest of the speakers were equally divided between those who just said they were going to be defeated in the next election unless we did something different and those who were all over the map without any coherent or decipherable message. (As was often the case, this last group included Raj Sherman and Iris Evans.)

The retreat ended with a strong plea by Ken Kowalski that MLAs should try to ensure “loyalty to the leader” at the upcoming AGM. What did this mean in practice? Luke Ouellette, another Stelmach loyalist, made it clear: each MLA must ensure that the delegates from their constituency association supported the premier. There was no follow-up discussion of this plea (or order?), perhaps because the Kowalski-Ouellette message appeared to be orchestrated from the premier’s office. But at the next break, it was discussed in the halls and there was pushback from some MLAs. I certainly didn’t agree. Rather than trying to win back disillusioned PC supporters with policy changes—like more fiscal restraint—we would in effect be kicking them out of the party. I remarked to one group of MLAs that if I told my Foothills-Rocky View board that we had to pre-screen delegates to the AGM, they would all resign.

A week later, at the cabinet retreat, the divisions that were latent in the caucus retreat now became more explicit and more personal. I continued to push for a new spending limitations rule as part of our next budget. “Where are we most vulnerable?” I asked rhetorically. On the Right. We need to focus on reducing spending and the deficit. If that requires breaking the 2007 contract with the ATA (teachers’ union), then do it. The marginal voters we need to win back care more about our budget problems than about making teachers happy.

A fellow minister quickly challenged me. “Teachers supported us last time. We have to keep our word.” My response: “Of course the teachers voted for us in 2008. We gave them $2 billion for their unfunded pension liability and a five-year contract.” This was too much for a second minister: “Ted,” he growled, “I’m going to take you on.” He re-asserted that not only do the teachers support us [the PC Party] but so too do many civil servants. “We can ignore the old Social Credit/Reform Party rump,” he told cabinet. “They are not a threat.” My response was true but not very statesmanlike: If we were to follow this advice, I told cabinet, we would be the first small-c conservative party in Canada—probably in the world—to base their electoral coalition on public sector unions.

The cabinet retreat ended the same as the caucus retreat the week before, with no resolution of these competing perspectives. As was his way, Stelmach used his closing remarks to try to minimize these conflicts by embracing both sides. Going forward, he told us, we would focus on seven priorities. One was to ensure a balanced budget within three years (by 2012). But others included “protecting the most vulnerable” and not reducing our capital/infrastructure budget.¹⁹ And so we staggered on.

Leadership Review

On October 21, I received a personal phone call from Chief of Staff Ron Glen. He requested that I phone Don Braid and Rick Bell, the political columnists at the Calgary Herald and Calgary Sun respectively, and “set the record straight”: that I supported the premier and that media reports that I was organizing for a leadership contest were false. I told him that I would be happy to do the latter, since I wasn’t organizing anything. But, I added, I did not have much interest in publicly defending policies that I didn’t support.

I pointed out that I had intentionally avoided media interviews over the preceding weeks, and that the one time I was cornered by a reporter, at the PC Party’s Leader’s Dinner in Red Deer, I had publicly defended the premier on CBC Radio. I told Glen that that he was overreacting. Stelmach was not going to lose the leadership vote, because most of the hardcore anti-Stelmach types had already left the party and would not even be at the AGM. I intended to be an observer not a player, and to let the leadership review take its course. This did not sit well with Glen. Nor, in fact, did it play out that way.

Over the weekend, I weighed my options. I could offer to trade my public support for Stelmach in return for the premier agreeing to drop two policy initiatives that I opposed—Bill 50, the controversial and expensive new North-South electricity transmission lines; and “hunt-farms,” allowing ranchers who raised domestic elk to sell “hunts” to shoot their large bull elk. Or I could bargain for a future cabinet post—Finance or Energy. But such “trades” had a timing problem: my endorsement had to come first. Once Stelmach survived the leadership review vote, there would be no penalty for not delivering his side of the deal. This could be solved if I demanded the cabinet appointment before the AGM, but this would cost either Mel Knight or Iris Evans their cabinet posts, something I doubted Stelmach would do to such loyal supporters.

The other option was simply to remain silent. But this had its own risks. If Stelmach were to survive the leadership review—as I thought he would—there could be retribution. I had a number of policy initiatives underway that I cared about—the Land Use Framework, the Recreational Access Management Program (RAMP), working with Upland Birds Alberta (UBA) to re-establish Alberta’s pheasant habitat and hunting; the trout pond at the Bow Habitat Station—all of which could be sidelined by the premier’s office. Or he could simply fire me altogether. In my mind, there was no clear path forward. This all changed quickly the next week.

Don Braid wrote another column reporting that former leadership rival Jim Dinning had publicly endorsed Stelmach, but then noted the “conspicuous silence” of Ted Morton. The following week, on the opening day of the fall session of the legislature, the media scrum was waiting for me, and they wanted an answer. Remaining silent was no longer an option. Speaking carefully, I said that it would be a mistake for the party to ignore our loss in the Calgary-Glenmore by-election (won by the Wildrose Party), but that it would be a bigger mistake to plunge the party into a leadership contest at this time. I declared that I would be voting against a leadership review at the AGM. And, for the record, I did.

Becoming Finance Minister

While Stelmach survived the leadership review vote, his fortunes—and thus the party’s—continued to sink. A Calgary Herald poll published December 11 showed Wildrose leading the PCs 39 percent to 25 percent. In rural Alberta—our traditional stronghold—we were even further behind—44 percent to 25 percent. These numbers fuelled media speculation that a cabinet shuffle was imminent and that some PC MLAs were considering crossing the floor to join Wildrose. In less than a month, both these predictions would come true.

It was in this context that in mid-December I received a message from the premier’s office asking me to come down to his third-floor office before I departed for the Christmas–New Year’s break. As I had so few private meetings with Stelmach, I knew something was afoot. In a friendly but serious tone, he proceeded to tell me what we all knew: that Mel Knight had become a lightning rod for oilpatch unhappiness with the New Royalty Framework and had to be replaced. A cabinet shuffle was imminent. Would I be willing to serve as his new minister of energy?

My response was simple and direct. Of course, I would love to be the Alberta minister of energy. Who wouldn’t? Even under the current conditions. But, I continued, there were two or three others who could competently do that job, and what we desperately needed was a new minister of finance. For this position, I said, there were only two options: Doug Horner or myself. Both Stelmach and the party needed political love in Calgary, and in Calgary, no one even knew who Doug Horner was. So realistically, I was his only choice.

Stelmach was characteristically noncommittal. He thanked me for my frankness and my support and said he would be back in touch after the break. The next day we left for Ventura, California, where we had rented a house to spend the holidays with our three children, all of whom were then working in Los Angeles.

Three weeks later, my cellphone rang. It was Ed Stelmach. A new cabinet would be announced within forty-eight hours. Would I be willing to be his new minister of finance? Yes, I replied immediately, but on one condition: Would my mandate be to ensure that we had Alberta’s budget “back in the black” by 2012, in time for our next election? Yes, Stelmach replied, that’s why I’m giving you this job. That was good enough for me, and so the deal was done.

The new cabinet was announced on January 12. In addition to me going to Finance, Mel Knight was moved out of Energy and into SRD—my previous portfolio. Liepert—a Calgary MLA—replaced Knight at Energy. Iris Evans, a Stelmach loyalist, was given a soft landing at International and Intergovernmental Relations, with little work and lots of travel. Two other Stelmach loyalists kept their cabinet posts: Doug Horner, Advanced Education; and President of Treasury Board Lloyd Snelgrove,. Horner was also promoted to deputy premier. However, two other Stelmach loyalists, George Groeneveld and Fred Horne, were unceremoniously dropped. A year later, both were early members of the dump-Stelmach faction.

The media’s reaction to the cabinet shuffle was consistent and predictable: a premier with sinking support in the polls and in his party tries to reverse the trend. As for my appointment, commentators uniformly described it as an attempt to fend off the Wildrose challenge on our right flank. One, however, gave it a different twist—one that turned out to be prescient:

Premier Ed Stelmach made a daring move last week in an effort to shore up sagging support for his government. He appointed his most dogmatic cabinet minister, Ted Morton, to the finance portfolio and then told him to take on Ottawa because Albertans are tired of having so much of their tax money funneled into equalization payments for other provinces.

As the recession took hold and Stelmach’s government became more and more unpopular, it was widely rumoured that Morton would defect to the upstart Wildrose Alliance, which was surging in the polls … . But Morton played his cards cleverly and managed to become such a powerful player that Stelmach could ill afford to ignore him. Now he is in a position to eclipse Stelmach if he so chooses, and stunt the growth of the Wildrose Alliance. … Morton once said that he is “every liberal’s worst nightmare—a right-winger with a PhD.” But his star is rising so quickly he could soon become Stelmach’s worst nightmare.²⁰

I was pleased with my new post. Politically, I knew I was taking a risk. Not only was I tying myself more closely to the Stelmach record, but in less than a month I would have to deliver Budget 2010. That budget was already at the printers and contained the largest projected annual deficit—$4.7 billion—in Alberta’s history.²¹ So much for my reputation for fiscal responsibility! Still, I thought the challenge that lay ahead was also an opportunity—not just for me but for Albertans. And I was encouraged by the premier’s words announcing the new cabinet:

I have promised Albertans that we will be back in the black in three years, and I have not wavered from that commitment. My new team will tackle Alberta’s fiscal challenges with determination.²²

If only it had turned out that way!