Home Regular Contributors Catherine Brownlee Alberta’s Pre-Election Budget Biggest Surprise? Fiscal Prudence!

Alberta’s Pre-Election Budget Biggest Surprise? Fiscal Prudence!

Catherine Brownlee

Dr. Jack Mintz joined us as our keynote speaker at our AEG meeting in Calgary on February 23rd.  Dr. Jack gave a speech regarding federal-provincial relations and the role of the West in Canada. We asked Dr. Jack if we could include part of his article regarding his recent opinion of the Alberta Budget.  He kindly agreed. It is below.

Pre-election budgets are rarely admirable. Money is spread around like pixie dust to curry the support of voters and to knee-cap opposition parties by borrowing their ideas. To a certain extent, the pre-election good news budget that Alberta Finance Minister Travis Toews delivered Tuesday follows this time-honoured political path, helped by $27.5 billion in oil and gas revenues in the 2022/23 fiscal year.

And so, it is easy to chide the budget for populist policies like freezing insurance rates and capping post-secondary tuition fee increases at 2 per cent and for industrial policy measures for politically favoured industries (such as agricultural processing and film and television production). And there is the usual scattering of minor tax credits instead of a general cut in personal taxes — with no mention of a tax review geared to major reform, which the United Conservative Party proposed when it took office.

Yet Alberta’s pre-election budget contains one truly remarkable surprise: a tough fiscal framework.

The first is legislation to mandate balanced budgets, with the usual exceptions for disasters or a sharp decline in revenues (due, for example, to a collapse in oil prices). The second is a fiscal rule to constrain year-over-year operational spending (net of “revenue-dedicated spending”) to rise no faster than the prior year’s population growth and prices (for next year the percentage is 8.7 percent). This makes it harder to go on a spending spree when revenues pour in. The third is to limit in-year expense increases to whatever has been budgeted or voted as a contingency amount — again with certain exceptions, such as the new federal funding for health care. In other words, no last-minute binges. Fourth, if Alberta runs a surplus, the government will use half for debt reduction and invest the rest in a new Alberta Fund, which will have discretion to reduce debt, deposit money into the Alberta Heritage Fund or fund one-time spending initiatives.

Despite the surge in oil and gas revenues since last year, the UCP has avoided the spending binge so many previous governments indulged in. In the fiscal year just starting, operational and capital-related spending rises by only 4 per cent. The Alberta Heritage Fund won’t be raided to fund spending: all its earnings will be re-invested.

As a result of these actions, Alberta reduced its tax-supported debt by $13.4 billion in the fiscal year just ending and a further $1.4 billion in 2023-24. Subtracting off assets, Alberta’s net debt will only be 10.2 per cent of GDP.

In the upcoming provincial election, Alberta’s opposition parties will likely promise more spending while the UCP will talk about fiscal prudence. The ballot question seems clear.”

Jack Mintz is the President’s Fellow, School of Public Policy, University of Calgary