Alberta
Alberta government must do more to avoid red ink
From the Fraser Institute
By Tegan Hill
As Albertans look toward a new year, it’s worth reviewing the state of provincial finances. When delivering news last month of a projected $4.6 billion budget surplus for fiscal year 2024/25, the Smith government simultaneously warned Albertans that a budget deficit could be looming. Confused? A $4.6 billion budget surplus sounds like good news—but not when its on the back of historically high (and incredibly volatile) resource revenue.
In just the last 10 years, resource revenue, which includes oil and gas royalties, has ranged from a low of $3.4 billion in 2015/16 (inflation-adjusted) to a high of $26.1 billion in 2022/23. Inflation-adjusted resource revenue is projected to be relatively high in historical terms this fiscal year at $19.8 billion.
Resource revenue volatility is not in and of itself a problem. The problem is that provincial governments tend to increase spending when resource revenue is high, but do not similarly reduce spending when resource revenue declines.
Overall, in Alberta, a $1 increase in inflation-adjusted per-person resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year, but a decline in resource revenue is not similarly associated with a reduction in program spending. Over time, this pattern has contributed to historically high levels of government spending that exceed ongoing stable levels of government revenue.
And while the Smith government has shown some restraint, spending levels remain significantly higher than reliable ongoing levels of government revenue. Put simply, unpredictable resource revenue continues to help fund Alberta’s spending—and when resource revenues inevitably fall, Alberta is at high risk of plummeting into a deficit.
Indeed, Finance Minister Nate Horner continues to emphasize that we are “living in extremely volatile times” and warning that if oil prices fall below $70.00 per barrel a budget deficit is “very likely.” According to recent forecasts, the price of oil may hit $66.00 per barrel in 2025.
To avoid this fate, the Alberta government must do more to rein in spending. Fortunately, there’s plenty of options.
For example, the government spends billions in subsidies (a.k.a. corporate welfare) to select industries and businesses every year. A significant body of research shows these subsidies fail to generate widespread economic benefits. Eliminating this corporate welfare, which would generate significant savings in the budget, is a good place to start.
If the Smith government fails to rein in spending, and Alberta incurs a budget deficit, it will only mean more government debt on the backs of Albertans. And with Albertans already paying approximately $650 each in provincial government debt interest each year, that’s something Albertans simply can’t afford.
With a new year set to begin, the Smith government continues to warn of a budget deficit. But rather than simply prepare Albertans for more debt accumulation—financed by their tax dollars—the government should do more to avoid red ink. That means cutting wasteful government spending.
Tegan Hill
Director, Alberta Policy, Fraser Institute
From the Fraser Institute
By Tegan Hill
Amid the economic uncertainty fuelled by Trump’s trade war, its perhaps more important than ever to understand Alberta’s crucial role in the federation and its outsized contribution to programs such as the Canada Pension Plan (CPP).
From 1981 to 2022, Albertan’s net contribution to the CPP—meaning the amount Albertans paid into the program over and above what retirees in Alberta received in CPP payments—was $53.6 billion. In 2022 (the latest year of available data), Albertans’ net contribution to the CPP was $3.0 billion.
During that same period (1981 to 2022), British Columbia was the only other province where residents paid more into the CPP than retirees received in benefits—and Alberta’s contribution was six times greater than B.C.’s contribution. Put differently, residents in seven out of the nine provinces that participate in the CPP (Quebec has its own plan) receive more back in benefits than they contribute to the program.
Albertans pay an outsized contribution to federal and national programs, including the CPP because of the province’s relatively high rates of employment, higher average incomes and younger population (i.e. more workers pay into the CPP and less retirees take from it).
Put simply, Albertan workers have been helping fund the retirement of Canadians from coast to coast for decades, and without Alberta, the CPP would look much different.
How different?
If Alberta withdrew from the CPP and established its own standalone provincial pension plan, Alberta workers would receive the same retirement benefits but at a lower cost (i.e. lower CPP contribution rate deducted from our paycheques) than other Canadians, while the contribution rate—essentially the CPP tax rate—to fund the program would likely need to increase for the rest of the country to maintain the same benefits.
And given current demographic projections, immigration patterns and Alberta’s long history of leading the provinces in economic growth, Albertan workers will likely continue to pay more into the CPP than Albertan retirees get back from it.
Therefore, considering Alberta’s crucial role in national programs, the next federal government—whoever that may be—should undo and prevent policies that negatively impact the province and Albertans ability to contribute to Canada. Think of Bill C-69 (which imposes complex, uncertain and onerous review requirements on major energy projects), Bill C-48 (which bans large oil tankers off B.C.’s northern coast and limits access to Asian markets), an arbitrary cap on oil and gas emissions, numerous other “net-zero” targets, and so on.
Canada faces serious economic challenges, including a trade war with the United States. In times like this, it’s important to remember Alberta’s crucial role in the federation and the outsized contributions of Alberta workers to the wellbeing of Canadians across the country.
Show your Alberta side. Buy Local. |
When the going gets tough, Albertans stick together. That’s why Alberta’s government is launching a new campaign to benefit hard-working Albertans.
Global uncertainty is threatening the livelihoods of hard-working Alberta farmers, ranchers, processors and their families. The ‘Buy Local’ campaign, recently launched by Alberta’s government, encourages consumers to eat, drink and buy local to show our unified support for the province’s agriculture and food industry.
The government’s ‘Buy Local’ campaign encourages consumers to buy products from Alberta’s hard-working farmers, ranchers and food processors that produce safe, nutritious food for Albertans, Canadians and the world.
“It’s time to let these hard-working Albertans know we have their back. Now, more than ever, we need to shop local and buy made-in-Alberta products. The next time you are grocery shopping or go out for dinner or a drink with your friends or family, support local to demonstrate your Alberta pride. We are pleased tariffs don’t impact the ag industry right now and will keep advocating for our ag industry.”
Alberta’s government supports consumer choice. We are providing tools to help folks easily identify Alberta- and Canadian-made foods and products. Choosing local products keeps Albertans’ hard-earned dollars in our province. Whether it is farm-fresh vegetables, potatoes, honey, craft beer, frozen food or our world-renowned beef, Alberta has an abundance of fresh foods produced right on our doorstep.
Quick facts
- This summer, Albertans can support local at more than 150 farmers’ markets across the province and meet the folks who make, bake and grow our food.
- In March 2023, the Alberta government launched the ‘Made in Alberta’ voluntary food and beverage labelling program to support local agriculture and food sectors.
- Through direct connections with processors, the program has created the momentum to continue expanding consumer awareness about the ‘Made in Alberta’ label to help shoppers quickly identify foods and beverages produced in our province.
- Made in Alberta product catalogue website
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