This bulletin assesses the extent to which the Smith government has increased spending since its original plan in the 2022 mid-year fiscal update and puts Alberta’s current risk of budget deficit into perspective.
Despite a commitment to spending restraint in Budget 2024, the Smith government expects to spend $31.1 billion more from 2023/24 to 2026/27 than originally planned in the 2022 mid-year. Only $10.4 billion (33.5 percent) can be explained by higher expected rates of inflation and population growth while $20.7 billion of the increase (66.5 percent) is above and beyond anything linked to these changes.
Due to this high spending, Alberta is at risk of incurring a budget deficit when relatively high resource revenue declines.
For perspective, if the government were to rely on stable ongoing levels of revenue for the budget, namely stable resource revenue (i.e., average resource revenue from 2004/05 to 2023/24) Alberta’s $4.6 billion projected budget surplus would turn into a $5.8 billion deficit in 2024/25. In 2025/26, Alberta’s projected budget surplus ($1.4 billion) turns to a $6.3 billion deficit and in 2026/27, Alberta’s projected budget surplus ($2.6 billion) turns to a $5.0 billion deficit.
In contrast, if the Smith government held to its original 2022 mid-year spending plan (adjusted for higher inflation and population expectations) Alberta’s budget deficit based on average resource revenue would be eliminated by 2026/27. Put simply, the Smith government can use its original spending plan as a guide to stabilize provincial finances.
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