A new study released Tuesday by the Fraser Institute, a Canadian public policy think-tank, warns the Alberta government's current budget surplus is precarious, heavily reliant on historically high resource revenue. Titled Alberta’s Underlying Budget Deficit, the report raises concerns about the province's fiscal stability if resource prices take a downturn.“The Alberta government has once again relied on volatile resource revenue to fund spending, which is a risky way to manage provincial finances," said Tegan Hill, Associate Director of Alberta Policy Studies at the Fraser Institute and the author of the report.The study indicates a consistent pattern where successive governments in Alberta tend to increase spending during periods of high resource revenue but do not proportionally cut spending when resource income declines. This approach leads to budget deficits and the accumulation of debt.While the current Alberta government projects a robust $5.5 billion budget surplus for the fiscal year 2023/24, this surplus is largely fueled by historically high resource revenue. The report suggests if resource revenue for this year were at its average over the last two decades, the projected surplus would instead transform into a concerning $4.8 billion deficit.Looking ahead to 2024/25 and 2025/26 under a hypothetical scenario with resource revenue at a 20-year average (adjusted for inflation), the study forecasts continued deficits. Over the three-year period, the province would accumulate an additional $25.9 billion in net debt, in stark contrast to the anticipated $10.5 billion surplus.“If the government wants to stabilize provincial finances, it must more closely align spending levels with ongoing stable levels of revenue. By relying on volatile resource revenue to balance its budget, the government again risks deficits and mounting debt when resource prices decline," said Hill.
A new study released Tuesday by the Fraser Institute, a Canadian public policy think-tank, warns the Alberta government's current budget surplus is precarious, heavily reliant on historically high resource revenue. Titled Alberta’s Underlying Budget Deficit, the report raises concerns about the province's fiscal stability if resource prices take a downturn.“The Alberta government has once again relied on volatile resource revenue to fund spending, which is a risky way to manage provincial finances," said Tegan Hill, Associate Director of Alberta Policy Studies at the Fraser Institute and the author of the report.The study indicates a consistent pattern where successive governments in Alberta tend to increase spending during periods of high resource revenue but do not proportionally cut spending when resource income declines. This approach leads to budget deficits and the accumulation of debt.While the current Alberta government projects a robust $5.5 billion budget surplus for the fiscal year 2023/24, this surplus is largely fueled by historically high resource revenue. The report suggests if resource revenue for this year were at its average over the last two decades, the projected surplus would instead transform into a concerning $4.8 billion deficit.Looking ahead to 2024/25 and 2025/26 under a hypothetical scenario with resource revenue at a 20-year average (adjusted for inflation), the study forecasts continued deficits. Over the three-year period, the province would accumulate an additional $25.9 billion in net debt, in stark contrast to the anticipated $10.5 billion surplus.“If the government wants to stabilize provincial finances, it must more closely align spending levels with ongoing stable levels of revenue. By relying on volatile resource revenue to balance its budget, the government again risks deficits and mounting debt when resource prices decline," said Hill.
