Alberta government must reform spending to avoid deficits

According to Premier Danielle Smith, the Alberta government is creating a new committee—composed of the premier, Finance Minister Nate Horner, Technology and Innovation Minister Nate Glubish, three treasury board members, and three private members—to review government spending in the province. Smith says the committee will find savings so her government can deliver on the promised personal income tax cut. But in fact, the need for a thorough program review is much broader than that.

A bit of background.

During the election campaign, Smith promised to create a new 8 per cent tax bracket for personal income below $60,000, which is expected to cost provincial coffers $1.4 billion annually. While the Smith government’s 2024 budget delayed this tax cut, the premier recently said a “substantial” cut is coming soon.

According to Smith, the committee will review “every single program in every single department to see if there are ways that we can remove wasteful spending, move spending from low-priority areas to high-priority areas, find ways that we can use technology to be able to deliver services better, and accelerate that personal income tax cut.”

Again, the idea of a program-by-program review is a good one. But the goal must span beyond finding savings for a single personal income tax cut. Alberta has a big spending problem and it must be meaningfully addressed.

Simply put, Alberta governments have a bad habit of increasing spending during the good times of high resource revenue and budget surpluses, like the province is currently experiencing, but fail to rein in spending when resource revenues fall. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

To be clear, the Smith government introduced a rule to limit increases in operating spending (e.g. spending on annual items such as government employee compensation) to the rate of population growth and inflation. But while this a step in the right direction, the government’s earlier spending increases since 2022 mean it continues to rely on relatively high—but very volatile—resource revenue to balance its budget.

Indeed, according to this year’s provincial budget, program spending this year will reach $14,334 per Albertan, which is $1,603 more per person (inflation-adjusted) than the government originally planned to spend in the 2022 mid-year budget update, Smith’s first fiscal plan as premier.

In total, the Alberta government will spend a projected $6,037 more per Albertan (inflation-adjusted) over four years from 2023/24 to 2026/27 than it planned in the 2022 mid-year budget update.

In other words, the government’s current plan to restrain spending by the rate of inflation and population growth is starting from a higher base level of spending. As a result, Alberta remains at risk of incurring a budget deficit when relatively high resource revenue declines.

For perspective, if resource revenue fell to its average over the last 10 years—rather than being at historic highs—the government’s $367 million projected surplus for this year would immediately fall to a deficit of $7.4 billion, even before the billion-dollar tax cut that Smith says is coming soon.

The Alberta government should use its program review to more closely align ongoing spending with stable ongoing levels of government revenue rather than onetime windfalls. Otherwise, Alberta will continue on its boom-and-bust rollercoaster that inevitably leads back to deficits and more debt.

Author:

Tegan Hill

Director, Alberta Policy, Fraser Institute

Related Topics:#AlbertaGovernmentSpending #AlbertaIncomeTax #FraserInstitute #TeganHill AlbertaGovernmentBudget

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Is There Any Canadian Province More Proud of their Premier Today…

Published on January 21, 2025

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Prior to Trumps inauguration event and announcement was made that Trump would not be imposing the 25% tariffs…

Which means, Canada seriously dodged a bullet here.

And while the Liberals will most likely frame this as, their success in showing, Bad Orange Man, that they’re tough and ready to burn down what is left of our economy, throwing Alberta under the bus, first…through a nuclear option…

Premier Smith rode this challenge out like the true champion we knew that she would be.

It’s hard to say if this was a legality matter in the grander scheme…or if the 25% tariffs would have truly been as big of an impact on the US…

One thing is clear, however…

Smith was ready to go to the tables with the Trump administration and opt for diplomacy over threats…which should be what we expect from our leaders.

And should these 25% tariffs have gone through…I’m more than sure a Plan B would have been brought out in civil conversations, over screeching rhetoric.

“She’s treasonous”, they screeched.

“She’s supporting her friends in Oil and Gas”, they relent.

“She should put Canada first”, they echo…

And let’s just address these…

Is Walmart beholden to Campbells soup? Fruit of the Loom? Kraft?

Or does Walmart sell products that helps keep their doors open?

Walmart is not beholden to any product…just like Premier Smith isn’t. We have 26% of our GDP – the largest portion – owed to Alberta O&G, something that we have a limited trade partner with, due to the Liberal – Anti-Alberta/Anti-O&G/Anti-Pipeline attitude that wants to spend us further in debt with unreliable and expensive “Renewables”.

What does Alberta get from renewables?

A higher cost for energy, in an affordability crisis, created by the same people who continue to push them…sounds like a terrible deal, for Albertans, and something a true leader would Not Favor.

When Walmart sits down to hash out a deal with Heinz, are they committing treason because they haven’t shown their allegiance to their own, ‘Great Value’ brand Ketchup?

No…other provinces have their own industries and resources, which they are free to continue developing independent of the federal government, as is suitable and supportive of their own economies…Alberta isn’t competing with them, nor Canada as a whole.

Alberta through industry and resource, actually supports Canada through a grand imbalance on “Equalization Payments”…

As do we through paying 50% more into the Canada Pension Plan, than we actually get out of the Canada Pension Plan…to the tune of a $334 Billion Dollars.

And as for this “Team Canada”, horseshit…

The title Premier of Alberta, should hold some clues as to who Premier Smith should be advocating for…as she is the Premier of Alberta and Not the Prime Minister, nor leader in the Liberal Party that has created this fiasco, to begin with.

Rail, as they may…other provinces can’t cast a vote in her support, either way…

None of the other provinces, through Members of Parliament, nor through Premiers, came to support Alberta and our economy through a number of Federal Bills that railed on our provincial resources…

Worse yet…these hypocrites cash cheques from our province, while telling us how to diversify our economy…to which I’d state one thing unequivocally…

If we wanted to be a Have Not Province…like you are…we’ll come and ask you for your advice.

Until then…

I’ll hold my Alberta Flag Higher than my Canadian…

And be proud today, of having the only Premier in the country of Canada, worthy of any praise today!