Lennie Kaplan spent more than two decades in the public service of Alberta, focusing on government fiscal, economic, energy, and environmental policy.Now that the dust has settled from the Alberta referendum, it is time for Danielle Smith’s UCP government to present positive reforms to Canadian fiscal federalism as a means of addressing legitimate Alberta concerns over the existing fiscal imbalance between Ottawa and the provinces.The Smith government needs to put a comprehensive set of proposals for federal-provincial fiscal reform forward and aggressively sell it to other provinces and the federal government. I believe the government has been missing in action (MIA) on this file for two years, presumably due to independence attraction syndrome. With no substantive reforms on the table now, Alberta has little to no negotiating leverage with Ottawa. The Equalization Program is scheduled to be renewed by March 31, 2029, and the guaranteed 5% growth in the Canada Health Transfer (CHT), under the 2023 health accord agreements, expires after 2027/28, so the time for reform is of the essence for Alberta.Detailed analyses of meaningful options for reform of federal-provincial fiscal arrangements have been done within the Alberta government in the past, especially within Treasury Board and Finance and Executive Council, Intergovernmental and International Relations. That’s why I find it so curious that numerous access-to-information (ATI) requests I have submitted over the past year to these ministries for this type of analysis have turned up so little, even with the few blank or heavily redacted pages that I did receive.This commentary fills the gap left by provincial government inaction by presenting a comprehensive package of reforms to federal-provincial fiscal arrangements in Canada designed to reduce Alberta’s large net fiscal contribution (NFC) to Ottawa. The reform package includes reforms to the Equalization Program (i.e., removing the GDP escalator, returning excess funds per capita to the provinces, eliminating overcompensation to provinces, letting payments shrink when regional disparities shrink, counting the full fiscal capacity of hydro Crown corporations, clawing back payments to high-spending provinces, and examining alternative measures of calculating natural resource capacity); reforms to the Canada Health Transfer and Canada Social Transfer (CST), combining them into a single equal-per-capita block, with a fixed 5% escalator; a single Labour Market Transfer (LMT); changes to the Fiscal Stabilization Program (FSP) and Employment Insurance (EI); and federal-provincial program disentanglement..Each reform initiative is compared against a business-as-usual (BAU) baseline over 25 years (2028/29 to 2052/53) under low-, medium-, and high-growth scenarios. The model produces a full statement of Alberta government operations (revenues, program expenses, debt-servicing costs, and surplus/deficit); Alberta’s balance sheet (financial assets, liabilities, taxpayer- and self-supported debt, net financial debt, and net debt); and Alberta’s NFC, expressed in a Statistics Canada format, for each scenario, both annually and cumulatively.Alberta has long contributed far more to federal revenues than it receives back in federal spending. Estimates put Albertans’ NFC to federal finances at $293.5 billion between 2007 and 2024 and project an annual Alberta NFC of roughly $12.7 billion in 2025, rising toward $20 billion by the late 2030s. The gap reflects Alberta’s younger population, higher employment rates, and higher incomes, which raise federal tax and premium collections while lowering federal spending on seniors’ benefits and EI. The Equalization Program is the most visible part of that contribution, although it is relatively small. Most of the Alberta NFC arises from the general federal tax and transfer system — personal and corporate income taxes, GST, EI premiums, and CPP contributions — measured against federal spending in the province. I find that the reform package, enumerated above, is worth $184.3 billion in gains to the Alberta government over the next 25 years in the medium-growth case, $206.3 billion in the low-growth case, and $149.6 billion in the high-growth case. Annual gains for the Alberta government phase in at about $800 million in 2028/29, rise to $4.9 billion by 2037/38, and reach $15.8 billion by 2052/53.Including avoided debt interest payments, the cumulative fiscal balance in the medium-growth case over 25 years under the reform package swings from a $207.4 billion deficit to a $61.9 billion surplus. The first surplus arrives in 2037/38 under reform, while under the BAU medium-growth case the province never returns to sustained balance. As a result of the reforms, cumulative debt servicing falls by $82.2 billion over 25 years. Alberta’s net financial debt in 2052/53, in the medium-growth case, is $81.5 billion under the reform package versus $350.8 billion under BAU — 5.2% of GDP versus 22.3% of GDP. Taxpayer-supported debt is $242.8 billion lower under the reform package than under BAU. .Albertans’ NFC to Ottawa falls by $217.2 billion, cumulatively, under the medium-growth case, or about 35% of Alberta’s projected $626 billion status-quo NFC.The single CHT/CST block with a fixed 5% escalator is the largest fiscal lever of the reform package, generating $90.1 billion in the medium-growth case because it compounds above projected nominal GDP growth and grows Alberta’s share with its above-average population growth. Equalization reform returning the excess per capita is second at $47.4 billion, followed by program and service disentanglement at $27.6 billion, the Labour Market Transfer at $11.1 billion, EI at $4.4 billion to the Alberta government (plus $32.9 billion to Alberta workers and employers), and the Fiscal Stabilization Program at $3.6 billion.Clearly, reforming federal-provincial fiscal arrangements materially reduces Alberta’s NFC to Ottawa, while at the same time strengthening the provincial government’s finances. The proposed key reforms focus on renewing the Equalization Program based on actual need, treating the escalator as a ceiling, valuing hydro at market value, and returning excess contributions on a per-capita basis. Additionally, the plan calls for establishing a single CHT/CST block with a fixed 5% escalator as the core of the next health and social accord, complete with a five-year review clause. Other priorities include securing a labour-force-based Labour Market Transfer, securing an uncapped Fiscal Stabilization Program, and pursuing Employment Insurance fairness through experience-rated provincial premiums while removing regional extended benefit differentials. Finally, the reforms seek to negotiate program and service disentanglement through full tax-point transfers for federal programs within provincial jurisdiction.To provide support for this comprehensive reform package, the Alberta government should publish a chapter in Budget 2027 and subsequent budgets tracking the net fiscal contribution (NFC), equalization overcompensation, federal transfer payment adequacy, the EI cross-subsidy, and the extent of federal program and service entanglement in areas of provincial responsibility.Albertans should be leaders in reform of federal-provincial fiscal arrangements, including reforms to such major transfer programs as the Equalization Program, the Canada Health Transfer, the Canada Social Transfer, the Fiscal Stabilization Program, and EI.The Alberta government should use its considerable fiscal influence in Canada to pursue meaningful options to reform federal-provincial fiscal relations and inform Albertans about the economic and fiscal effects of these options. I hope to hear Premier Smith outline in her speech this evening a positive agenda for change to federal-provincial fiscal arrangements between Alberta and Canada. Lennie Kaplan spent more than two decades in the public service of Alberta, focusing on government fiscal, economic, energy, and environmental policy. He served as a Senior Manager in the Fiscal and Economic Policy Division of the Ministry of Treasury Board and Finance, where he worked on cross-ministry initiatives assessing the economic and fiscal impacts of federal climate and energy policies and assisted in developing meaningful options to reform federal-provincial fiscal arrangements. He later served as Executive Director to the MacKinnon Panel on Alberta’s Finances. He has continued to contribute to public policy discussions through research and commentary on public finance, energy policy, climate policy, and economic competitiveness.
