Alberta’s new fiscal rules positive step, but sustainable finances impeded by increases in per person spending since 2022

Alberta’s ‘Spending Restraint’ in Perspective

• Despite projected surpluses from 2024/25–2026/27, Alberta is at risk of returning to a budget deficit, due to high spending, when relatively high resource revenue declines.
• Premier Danielle Smith has recognized this risk and signalled that there would be a new approach to provincial finances that relies less heavily on resource revenue, which includes restraining spending by less than inflation and population growth. This “restraint,” however, should be considered within the context of the Smith government’s spending increases thus far.
• Specifically, while real program spending is projected to decline annually over the next three years, the Smith government plans to spend $30.0 billion more from 2023/24–2026/27 than originally forecast in the 2022 mid-year plan, equivalent to an additional $6,037 per Albertan.
• It’s also important to consider the spending plan within the context of the actual level required to stabilize provincial finances (i.e. the spending level that would align stable ongoing government revenue, rather than temporary windfalls). One reasonable way to estimate Alberta’s “stable” revenue is to calculate total revenue based on average resource revenue over the last two decades.
• Aligning spending with stable revenue would require significantly more restraint than is shown in Budget 2024. Specifically, program spending would need to be lower by 10.1 percent in 2024/25, 8.7 percent in 2025/26, and 6.8 percent in 2026/27. Notably, if the Smith government simply held to its 2022 mid-year spending plan, spending would be aligned, and in fact, modestly lower than this alternative level that aligns with stable revenue.