KAPLAN: Alberta Budget 2026 is fueling a fiscal crisis and clearing the path to independence

Lennie Kaplan is a former senior manager in the Fiscal and Economic Policy Division of Alberta’s Ministry of Treasury Board and Finance (TB&F).The Alberta budget, by its notable omissions, seems aimed at paving the way for a “yes vote” on Alberta independence. Budget 2026 is plagued throughout by a failure to make tough decisions on spending, revenue diversification, and long-term savings of oil and gas revenues to effect long-needed major repairs to the province’s “broken” finances. The budget appears to be courting fiscal failure as a political tradeoff for creating more favourable conditions for Alberta’s independence from Canada.The current state of Alberta finances reminds me of the Alberta government riding on Space Mountain rollercoaster at Disneyland. The government goes up and down the roller coaster in the dark. It hears the passengers’ screams ahead; it knows there is real danger ahead, yet it doesn’t know what to do. The Alberta government seems paralyzed with fear, yet totally captivated by the wild ride of the “fiscal rollercoaster.”Eventually, the stress and strain require the roller coaster to be taken into the shop for refurbishment. Space Mountain in Disneyland has gone in for a minor refurbishment. But, unlike Space Mountain, Alberta’s finances need a major refurbishment to respond to new fiscal realities.The cold, hard facts presented in Budget 2026 confirm the damage that has already been done by the government’s deep dependence on oil and gas revenues to fund current expenses and the lack of action to fundamentally change this flaw in fiscal planning over the past three years..Budget deficits for the upcoming years are projected to be significant, with $9.4 billion anticipated in 2026/27 and $7.6 billion in 2027/28. Cash deficits are even more alarming, with figures of $6.4 billion in 2025/26, $16.3 billion in 2026/27, $14.7 billion in 2027/28, and $13.2 billion in 2028/29. Budget 2026 does not attempt to return to a balanced budget by 2028/29. The government exploits loopholes in its fiscal rules, which only require balancing the budget once a deficit is reported in the 2025/26 year-end financial statements. This lack of a clear path to a balanced budget necessitates $6.9 billion in fiscal adjustments, which the government has yet to identify despite a PRCC program review process in place for nearly two years. The process has produced thousands of blank pages under Access to Information requests, with no tangible results presented in the budget.In 2022/23, $15 billion in oil and gas revenues were necessary to balance the budget. By 2028/29, this figure is expected to rise to $23.8 billion. The impact of oil price fluctuations is also significant; a $1.00 US per barrel reduction in WTI oil prices would have resulted in a $500 million drop in provincial government revenues in 2022/23. By 2026/27, this impact is projected to increase to $680 million. Just three years ago, the Alberta government required WTI crude oil at $70.00 US per barrel to balance the budget. However, estimates now suggest that $74.32 US per barrel will be needed in 2026/27, $78.18 US per barrel in 2027/28, and $77.65 US per barrel in 2028/29..OLDCORN: Red Ink Republic of Alberta — Danielle Smith’s $9.5 billion betrayal of fiscal conservatism.The net financial debt is growing rapidly, from $34.3 billion as of March 31, 2025, to $69.8 billion as of March 31, 2029, marking an increase of $35.5 billion, or over 103%, in just four years. Alberta taxpayer-supported debt is also on the rise, increasing from $79.3 billion as of March 31, 2023, to $137.5 billion as of March 31, 2029, a rise of $58.2 billion, or over 73%, in six years. Consequently, annual interest costs on this mounting debt are escalating from $2.8 billion in 2022/23 to $4.9 billion in 2028/29, an increase of $2.1 billion or 75%. Net borrowing requirements have surged from $3.3 billion in 2022/23 to an estimated $20.9 billion in 2026/27, $22.6 billion in 2027/28, and $18.6 billion in 2028/29.There is no attempt to control runaway operating spending. Total operating spending in 2026/27, initially projected at $63 billion in Budget 2024, is now projected at $70.4 billion in Budget 2026, marking an increase of $7.4 billion, or nearly 12%. Healthcare operating expenses in 2026/27, initially projected at $25 billion in Budget 2024, are now projected at $28.1 billion, an increase of $3.1 billion, or 12%. Healthcare spending is projected to consume 46.5% of total government revenues in 2026/27 and 46.7% by 2028/29, compared to 35% in 2022/23. This shift in funding is effectively crowding out operating spending in other core provincial responsibilities, such as K-12 education, social services, and infrastructure (capital grants)..Alberta’s finances have been living on borrowed time for a number of years, but in Budget 2026, the Smith government seems determined to ignore the stop signal ahead and barrel right through the busy intersection. The government seems almost desperate in its fervour for the next oil boom just around the corner, promising not to throw it away this time. This seems eerily reminiscent of the fiscal policies pursued by Alberta governments back in the late 1980s and early 1990s. It didn’t work then, and it likely will not work this time, certainly not over the medium to long term. I hope the decision to finally review the government’s fiscal framework doesn’t mean fiscal practices and rules will be rolled back and abandoned in the name of “fiscal flexibility,” but I am not hopeful.In fact, the Smith government’s decision to give up and “throw its hands in the air” and not present a three-year balanced budget plan in Budget 2026 is very similar to what the Don Getty government did with Budget 1992. It took Premier Ralph Klein and Alberta Liberal Leader Laurence Decore to rescue Alberta from fiscal oblivion back then. It doesn’t appear there is any “fiscal saviour” on the horizon this time. Over the past two and a half years, I have talked extensively about the major elements for a full financial reset in Alberta, including transformational healthcare reforms, a comprehensive and permanent spending review, major efforts at revenue diversification, dedicated right “off the top” savings of oil and gas revenues into the Alberta Heritage Savings Trust Fund (AHSTF), and fixing the fiscal framework.Premier Smith knows what the real problems are and the long-term solutions needed for repairing Alberta’s broken finances. She has talked previously about the need for a reset. I totally agree. Unfortunately, Budget 2026 doesn’t do the job at all and appears to tread down a more dangerous and perilous path that may set the stage for Alberta independence.Lennie Kaplan is a former senior manager in the Fiscal and Economic Policy Division of Alberta’s Ministry of Treasury Board and Finance (TB&F), where, among other duties, he examined best practices in fiscal frameworks and program reviews, and savings strategies for non-renewable resource revenues. In 2019, Mr. Kaplan served as Executive Director to the MacKinnon Panel on Alberta’s Finances.

KAPLAN: Alberta Budget 2026 is fueling a fiscal crisis and clearing the path to independence

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