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Alberta

Premier Danielle Smith’s first budget adds health and education spending and forecasts a $2.4 billion surplus

Published

2 years ago

12 minute read

Budget 2023 forecasts a surplus of $2.4 billion in 2023-24 and reflects the government decisions to invest in Alberta’s future and provide security for Alberta families and communities.

“Fiscal responsibility matters. It’s been key to achieving our strong fiscal standing and will be essential for sustainable program delivery in the future. In Budget 2023, we continue our commitment to paying down debt all while continuing to position our economy for growth and invest in the top priorities of Albertans.”

Travis Toews, President of Treasury Board and Minister of Finance

Growing jobs and the economy

Budget 2023 advances the province’s already successful Alberta at Work initiative, investing a further $176 million in 2025-26 to help Albertans build their skills and find jobs, and assisting employers in their search for workers in existing and emerging sectors.

A $111-million increase over three years will add seats to expand enrolment in areas with the highest student demand, including non-trade construction, energy, technology and business. Alberta’s government is committed to removing barriers in order to attract highliy skilled professionals and job-creating entrepreneurs to Alberta.

Investments in aviation and aerospace, agri-food manufacturing and $24.5 million this fiscal year to the Alberta Technology and Innovation Strategy will enhance emerging and innovative technologies, drive economic diversification and attract even more venture capital investments to build on successive record-breaking years. A $54-million per year increase in funding for the Alberta Petrochemicals Incentive Program starting in 2025-26 will support Air Products’ clean hydrogen facility – and continue to make Alberta a global leader in petrochemical production, bring long-term investments and create thousands of construction jobs.

Transforming health care to meet Albertans’ needs

Alberta’s government is setting a new record for spending in health care this year by committing an additional $965 million in operating expense in 2023-24 for the Ministry of Health to continue to build a stronger health-care system for Albertans. This funding will ensure the government can take the urgent action needed to improve ambulance response times, decrease emergency room wait times, reduce wait times for surgeries and attract more front-line health workers to deliver the care patients expect and deserve.

Budget 2023 includes $158 million this year to attract, recruit and train more doctors and nurses to work across the province, with a focus on family physicians for rural areas. Alberta’s primary health-care system is being strengthened and modernized with a record $2 billion over three years. Another $196 million over three years will strengthen emergency medical services and $3.1 billion over three years will modernize and expand health facilities across Alberta, including the Red Deer Regional Hospital and expanding capacity for operating rooms in 15 communities to complete more of the surgeries Albertans are waiting for. An additional $529 million in capital maintenance and renewal funding will be used to keep facilities operational and a further $732 million in self-financed investment will add to health infrastructure.

Supporting Albertans, students and families

With $2.3 billion in affordability measures in 2023-24, $1.5 billion in 2024-25 and another $1.8 billion in 2025-26, Alberta’s government is keeping more money in the pockets of Albertans and continues to provide a helping hand to those in need. New relief measures will save post-secondary students about $18 million each year with lower interest rates for student loans.  Adoptive families will have access to more subsidies and tax breaks to make adoption more feasible. Workers in the social services sector will see their wages increased by 10 per cent, so they can continue to provide compassionate services to people with complex needs, those experiencing homelessness or family violence. Albertans will also receive a larger tax credit when they donate to their favourite charities to lend a helping hand.

An increase of $1.8 billion for education will help Alberta’s young people succeed and thrive in smaller classes. This increase will support the hiring of up to 3,000 education staff, including teachers, educational assistants, bus drivers and school support staff to give students the focused time and attention they need to succeed in their studies.

The government is also investing $59.3 million in 2023-24 to create thousands more licensed child-care spaces as part of opening a total of 68,700 new spaces by the end of March 2023, increasing access and choice so parents can go to school, work and participate in the economy. Affordability grants to child-care operators and subsidies for parents will further lower the cost of child care, with the Alberta federal-provincial child-care agreement already reducing fees by an average of 50 per cent in 2022 for young children.

Keeping Albertans and communities safe

All Albertans, families and children have the right to safety and security in their homes, at school, at work and in their communities, no matter where they live.

Budget 2023 keeps communities safe by increasing collaboration between first responders and community partners and increasing access for vulnerable populations to recovery-oriented mental health and addiction supports and services.

  • $12.5 million in 2023-24 will support the expansion of therapeutic living units within provincial correctional facilities to help inmates access recovery-oriented treatment and recovery programs. This is a joint investment between Mental Health and Addiction and Public Safety and Emergency Services.
  • $65 million over the next three years will strengthen First Nations policing to address the unique needs of their communities and members. This will secure new policing positions and the creation of another First Nations police service in addition to the Lakeshore Regional Police Service, the Blood Tribe Police Service and Tsuut’ina Nation Police Service.
  • $20 million over three years is committed to combat human trafficking and ensure necessary resources are provided to survivors and victims.

The province will review options for delivering policing services with the objective of improving the safety and security of Albertans and their property.

Committing to responsible fiscal management

Budget 2023 secures Alberta’s future by staying true to responsible fiscal management and spending hard-earned tax dollars wisely to support Albertans today and tomorrow.

A new fiscal framework would require all future Alberta governments to balance their annual budgets, with certain exceptions, and use any surpluses to first pay down debt and save for the future before investing in one-time initiatives.

Taxpayer-supported debt is being reduced by $14.8 billion between 2021-22 and 2023-24, and the Alberta Heritage Savings Trust Fund is growing by $5.7 billion between 2021-22 and 2025-26. This will bring taxpayer-supported debt to $78.3 billion at the end of 2023-24, and saves Albertans estimated $260 million in this fiscal year and $551 million in 2023-24.

Mandating balanced budgets and tying operating expense increases to population growth and inflation would help control spending to prevent what could be temporarily high resource revenue being used to increase spending in an unsustainable way. Spending decisions instead would be focused on not only meeting the needs and priorities of Albertans but also on continuing to drive change, innovation and improvement of vital services and programs.

Revenue

  • In 2023-24, total revenue is estimated to be $70.7 billion, which is $5.4 billion lower than the forecast for 2022-23. Commodity prices are expected to soften due to fears of a looming global recession, while investment income is expected to recover well after dropping in 2022-23.
    • Revenue is expected to remain above $70 billion in following years. The revenue forecast for 2024-25 is $71.7 billion and for 2025-26 is $72.6 billion.
    • In 2023-24, corporate income tax revenue is estimated at $5.9 billion, down 7.8 per cent from 2022-23, largely due to declining commodity prices.
    • Non-renewable resource revenue is estimated to be $18.4 billion in 2023-24, down from the highest-ever resource revenue of $27.5 billion forecast in 2022-23.

Expense

  • Total expense in 2023-24 is $68.3 billion, which is $2.6 billion more than the forecast for 2022-23.
    • Total expense is expected to be $69.7 billion in 2024-25 and $71.2 billion in 2025-26.

Surplus

  • A surplus of $2.4 billion is forecast for 2023-24 compared with $10.4 billion in 2022-23.
    • Surpluses of $2 billion and $1.4 billion are forecast for 2024-25 and 2025-26, respectively.

Economic outlook

  • In 2022, real gross domestic product (GDP) rose by an estimated 4.8 per cent, which is lower than the budget forecast of 5.4 per cent. The softer growth reflects the impact of higher interest rates and prices on consumer spending and residential investment. Even so, real GDP fully recovered from the COVID-19 downturn and surpassed the 2014 peak in 2022.
  • In 2023, real GDP is expected to grow by 2.8 per cent, up slightly from the 2.7 per cent growth forecast at mid-year.

Energy and economic assumptions, 2023-24

  • West Texas Intermediate oil (USD/bbl)                                  $79.00
  • Western Canadian Select @ Hardisty (CND/bbl)                 $78.00
  • Light-heavy differential (USD/bbl)                                          $19.50
  • Natural gas (CND/GJ)                                                               $4.10
  • Convention crude production (000s barrels/day)                 497
  • Raw bitumen production (000s barrels/day)                          3,345
  • Canadian dollar exchange rate (USD/CDN)                         $76.20
  • Interest rate (10-year Canada bonds, per cent)                   3.60

Budget 2023 secures Alberta’s bright future by transforming the health-care system to meet people’s needs, supporting Albertans with the high cost of living, keeping our communities safe and driving the economy with more jobs, quality education and continued diversification.

 

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This is a news release from the Government of Alberta.

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Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

Published on November 21, 2024

By

From the Fraser Institute

By Tegan Hill

According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.

The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.

For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).

And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.

In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.

This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.

Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.

Of course, if the government falls back into deficit there are implications for everyday Albertans.

When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.

According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.

Author:

Tegan Hill
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Alberta

Premier Smith says Auto Insurance reforms may still result in a publicly owned system

Published on November 21, 2024

By

Better, faster, more affordable auto insurance

Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.

After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.

Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.

“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”

Danielle Smith, Premier

“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”

Nate Horner, President of Treasury Board and Minister of Finance

Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.

Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.

Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.

In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.

Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.

By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.

“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”

Nathan Neudorf, Minister of Affordability and Utilities

Quick facts

  • Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
  • A 2023 report by MNP shows
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