From the Fraser Institute

By Paige MacPherson and Max Shang

In Alberta, the gap between report card grades and test/exam scores increased sharply in 2022—the same year ChatGPT came out.

Report card grades and standardized test scores should rise and fall together, since they measure the same group of students on the same subjects. But in Alberta high schools, report card grades are rising while scores on Provincial Achievement Tests (PAT) and diploma exams are not.

Which raises the obvious question—why?

Report card grades partly reflect student performance in take-home assignments. Standardized tests and diploma exams, however, quiz students on their knowledge and skills in a supervised environment. In Alberta, the gap between report card grades and test/exam scores increased sharply in 2022—the same year ChatGPT came out. And polling shows Canadian students now rely heavily on ChatGPT (and other AI platforms).

Here’s what the data show.

In Alberta, between 2016 and 2019 (the latest year of available comparable data), the average standardized test score covering math, science, social study, biology, chemistry, physics, English and French language arts was just 64, while the report card grade 73.3—or 14.5 per cent higher. Data for 2020 and 2021 are unavailable due to COVID-19 school closures, but between 2022 and 2024, the gap widened to 20 per cent. This trend holds regardless of school type, course or whether the student was male or female. Across the board, since 2022, students in Alberta high schools are performing significantly better in report card grades than on standardized tests.

Which takes us back to AI. According to a recent KPMG poll, 73 per cent of students in Canada (high school, vocational school, college and university) said they use generative AI in their schoolwork, an increase from the previous year. And 71 per cent say their grades improved after using generative AI.

If AI is simply used to aid student research, that’s one thing. But more than two-thirds (66 per cent) of those using generative AI said that although their grades increased, they don’t think they’re learning or retaining as much knowledge. Another 48 per cent say their “critical thinking” skills have deteriorated since they started using AI.

Acquiring knowledge is the foundation of higher-order thinking and critical analysis. We’re doing students a deep disservice if we don’t ensure they expand their knowledge while in school. And if teachers award grades, which are essentially inflated by AI usage at home, they set students up for failure. It’s the academic equivalent of a ski coach looking at a beginner and saying, “You’re ready for the black diamond run.” That coach would be fired. Awarding AI-inflated grades is not fair to students who will later struggle in college, the workplace or life beyond school.

Finally, the increasing popularity of AI underscores the importance of standardized testing and diploma exams. And parents knew this even before the AI wave. A 2022 Leger poll found 95 per cent of Canadian parents with kids in K-12 schools believe it’s important to know their child’s academic performance in the core subjects by a fair and objective measure. Further, 84 per cent of parents support standardized testing, specifically, to understand how their children are doing in reading, writing and mathematics. Alberta is one of the only provinces to administer standardized testing and diploma exams every year.

Clearly, parents should oppose any attempt to reduce accountability and objective testing in Alberta schools.

Paige MacPherson

Associate Director, Education Policy, Fraser Institute

Max Shang

Economist, Fraser Institute

From the Fraser Institute

By Tegan Hill and Grady Munro

Following the recent release of the Carney government’s first budget, Fitch Ratings (one of the big three global credit rating agencies) issued a warning that the “persistent fiscal expansion” outlined in the budget—characterized by high levels of spending, borrowing and debt accumulation—will erode the health of Canada’s finances and could lead to a downgrade in Canada’s credit rating.

Here’s why this matters. Canada’s credit rating impacts the federal government’s cost of borrowing money. If the government’s rating gets downgraded—meaning Canadian federal debt is viewed as an increasingly risky investment due to fiscal mismanagement—it will likely become more expensive for the government to borrow money, which ultimately costs taxpayers.

The cost of borrowing (i.e. the interest paid on government debt) is a significant part of the overall budget. This year, the federal government will spend a projected $55.6 billion on debt interest, which is more than one in every 10 dollars of federal revenue, and more than the government will spend on health-care transfers to the provinces. By 2029/30, interest costs will rise to a projected $76.1 billion or more than one in every eight dollars of revenue. That’s taxpayer money unavailable for programs and services.

Again, if Canada’s credit rating gets downgraded, these costs will grow even larger.

To maintain a good credit rating, the government must prevent the deterioration of its finances. To do this, governments establish and follow “fiscal anchors,” which are fiscal guardrails meant to guide decisions regarding spending, taxes and borrowing.

Effective fiscal anchors ensure governments manage their finances so the debt burden remains sustainable for future generations. Anchors should be easily understood and broadly applied so that government cannot get creative with its accounting to only technically abide by the rule, but still give the government the flexibility to respond to changing circumstances. For example, a commonly-used rule by many countries (including Canada in the past) is a ceiling/target for debt as a share of the economy.

The Carney government’s budget establishes two new fiscal anchors: balancing the federal operating budget (which includes spending on day-to-day operations such as government employee compensation) by 2028/29, and maintaining a declining deficit-to-GDP ratio over the years to come, which means gradually reducing the size of the deficit relative to the economy. Unfortunately, these anchors will fail to keep federal finances from deteriorating.

For instance, the government’s plan to balance the “operating budget” is an example of creative accounting that won’t stop the government from borrowing money each year. Simply put, the government plans to split spending into two categories: “operating spending” and “capital investment” —which includes any spending or tax expenditures (e.g. credits and deductions) that relates to the production of an asset (e.g. machinery and equipment)—and will only balance operating spending against revenues. As a result, when the government balances its operating budget in 2028/29, it will still incur a projected deficit of $57.9 billion when spending on capital is included.

Similarly, the government’s plan to reduce the size of the annual deficit relative to the economy each year does little to prevent debt accumulation. This year’s deficit is expected to equal 2.5 per cent of the overall economy—which, since 2000, is the largest deficit (as a share of the economy) outside of those run during the 2008/09 financial crisis and the pandemic. By measuring its progress off of this inflated baseline, the government will technically abide by its anchor even as it runs relatively large deficits each and every year.

Moreover, according to the budget, total federal debt will grow faster than the economy, rising from a projected 73.9 per cent of GDP in 2025/26 to 79.0 per cent by 2029/30, reaching a staggering $2.9 trillion that year. Simply put, even the government’s own fiscal plan shows that its fiscal anchors are unable to prevent an unsustainable rise in government debt. And that’s assuming the government can even stick to these anchors—which, according to a new report by the Parliamentary Budget Officer, is highly unlikely.

Unfortunately, a federal government that can’t stick to its own fiscal anchors is nothing new. The Trudeau government made a habit of abandoning its fiscal anchors whenever the going got tough. Indeed, Fitch Ratings highlighted this poor track record as yet another reason to expect federal finances to continue deteriorating, and why a credit downgrade may be on the horizon. Again, should that happen, Canadian taxpayers will pay the price.

Much is riding on the Carney government’s ability to restore Canada’s credibility as a responsible fiscal manager. To do this, it must implement stronger fiscal rules than those presented in the budget, and remain accountable to those rules even when it’s challenging.