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By Tegan Hill and Milagros Palacios
The Smith government recently released its 2026 budget, which includes deficits of $9.4 billion, $7.6 billion and $6.9 billion over the next three years. The government states that “global economic uncertainty, lower oil prices and rapid population growth are placing real pressure on Alberta’s finances and public services.” It’s true, many factors contribute to this deficit, but the government can do more to avoid red ink.
Of course, deficits fuel debt accumulation. Total provincial debt will rise from $102.5 billion in 2024/25 to a projected $158.9 billion by 2028/29. Correspondingly, interest costs on that debt will increase from $3.2 billion to $4.9 billion over the period—that’s $933 per Albertan by 2028/29 no longer available for health care, education, or to create fiscal room for tax relief.
Again, Alberta does face population pressures and oil prices have declined, affecting government coffers on both the revenue and spending side. But Alberta’s spending levels have been too high for years—this isn’t a new problem. In the last 18 years, the provincial government has run a deficit in all but five years—during times when the government typically got lucky with a windfall in resource revenue (e.g. oil and gas royalties).
So, the Smith government must rein in spending. But where should it start?
According to the budget, total employee compensation in Alberta’s government sector has risen from $31.1 billion in 2022/23 to a projected $38.0 billion in 2026/27 (inflation-adjusted). That’s an increase of $6.9 billion or 22.0 per cent over four years, again, after adjusting for inflation.
This increase is not due to hiring more doctors and more teachers. In fact, in percentage terms, compensation increases were highest in other departments, such as the public service, which is basically government administration and bureaucracy (29.8 per cent increase) and other government agencies such as Alberta Innovates (36.1 per cent). Health care, on the other hand, grew by 24.3 per cent, education by 20.0 per cent, post-secondary by 14.6 per cent—all of which include administrative roles—while physician compensation and development grew by 19.7 per cent.
The jump in government compensation costs likely reflects the growing number of government jobs. According to Statistics Canada, from 2022 to 2024 (the latest year of available data), Alberta provincial government jobs have increased by 40,215. Again, this doesn’t simply reflect more doctors and teachers—jobs increased across the board including in government administration and bureaucracy.
Despite any external forces, the Smith government should focus on what it can control. That means reviewing government jobs and compensation in Alberta to find meaningful savings to reduce budget deficits and debt accumulation.
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