KAPLAN: From deficits to downgrades — why Alberta must rein in spending before it’s too late

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 aftershocks of Budget 2026 confirm that the Alberta government’s spending is out of control and needs to be reined in by a comprehensive and legislated review of all provincial spending to avoid a future of credit downgrades. In response to Budget 2026, Moody’s Investment Services concluded that spending growth and weaker oil revenues have led to rising debt and large deficits, and this is credit negative for Alberta. This warning should be a real “eye opener” for the Alberta government to restructure its fatally flawed cabinet committee-led program review process.Even with a cabinet committee tasked with reviewing spending, there has been a disturbing pattern of the Smith government far exceeding budget spending projections over the past four years. Any government commitment in Budget 2026 to hold annual operating spending increases to less than the combined rate of inflation and population growth in both 2027/28 and 2028/29 should be taken with a mere “grain of salt.”Let’s look at the evidence. In 2022/23, operating spending was initially projected to increase by 2.3%, but actual operating spending increased by 8.1%. In 2023/24, operating spending was initially projected to increase by three percent, but actual operating spending increased by five percent. In 2024/25, operating spending was initially projected to increase by 3.9%, but actual operating spending increased by 7.2%. And, in 2025/26, operating spending was initially projected to increase by 3.6%, but is now projected to increase by 7.9%.Budget 2026 also reveals that between 2022/23 and 2028/29, program expenses per person are projected to grow from $13,736 to $16,110, an increase of nearly $2,375 per person, or 17%. Alberta is once again a high-spending province, with middle-of-the-road outcomes. As the Alberta government faces the challenge of achieving long-term fiscal sustainability, the current approach of high spending with mediocre outcomes is no longer acceptable..According to the government’s own budget documents, up to $6.9 billion in fiscal adjustments, representing 8.2% of program expenses, will be needed to get back to a balanced budget by 2028/29. Despite having a cabinet committee-led program review in operation for nearly two years, the Smith government has not identified any of these $6.9 billion in fiscal adjustments. Program review has been generating thousands of blank pages under various Access to Information (ATI) requests I have submitted over the past two years, but there is hardly any mention of it in Budget 2026 or the results it has achieved.Although Alberta has reviewed some of its programs and services over the past 25 years, these efforts have been fragmented, reactive to crises, limited in scope, and have lacked permanence. Monitoring has also been inadequate. Program review under the Smith government seems to be going down the same path as these other program review exercises and needs to be totally restructured to get meaningful results.There is a “best practice” in Alberta on how to structure program review to get results. In Alberta, in the mid-1990s, the Klein government was faced with the need to make fiscal adjustments of nearly 20% to the provincial budget to deal with a structural deficit. A program and service review process was initiated to set the core priorities of government, as a means of making the required cuts to spending. A flow chart was prepared and was to be used by each department in undertaking program and service review. Questions asked included: “Is the program/service a core requirement” and “Should the provincial government be responsible for the service?” All non-core programs were candidates for termination, and every program and service was subjected to this scrutiny. Each department was asked by Alberta Treasury to assess the feasibility of 20% and 40% cut scenarios. One of the major factors for the success of the program and service review process in Alberta was the political support directly from Premier Klein and Provincial Treasurer Jim Dinning. Between 1992/94 and 1995/96, program expenses fell by nearly 21%, and the province moved from an annual deficit of $3.4 billion to a budget surplus of $1.1 billion.In 2026, Albertans have the same right to expect that spending decisions are based on robust, evidence-based data. Many of the issues the Alberta government is trying to tackle today cut across traditional ministry and agency boundaries and require innovative responses and “outside-the-box” thinking. Transformational change, not incremental change, is needed to transform the Alberta government into one that is more responsive to its citizens and meets the challenges and opportunities of the future..Putting all provincial programs and services under a permanent and legislated program review microscope will ensure that they are more responsive to the needs of Albertans. A robust program review framework will establish a better alignment between financial resources and desired outcomes, a key instrument for making government more outcome-based. Half-baked measures, such as the Smith government’s current program review, are not enough.I offer these six key recommendations for establishing a robust program review framework in Alberta.First, the Government of Alberta should regularly incorporate a formal annual program review framework within its budget and fiscal planning processes to eliminate waste, duplication, and non-essential spending.Second, the requirement for a formal annual program review should be made a permanent part of Alberta’s budget and fiscal planning process by including it in the province’s fiscal framework laws.Third, a permanent Program Review Secretariat should be created to analyze and evaluate government programs and services on an ongoing basis to ensure effectiveness and efficiency across all government areas.Fourth, overall savings targets should be established and clearly communicated to government ministries, and there should be a means to hold ministries accountable for achieving these savings targets..Five, program review should incorporate performance information to improve effectiveness and efficiency while keeping costs under control and maintaining fiscal discipline. This involves assessing the savings gained by finding more cost-effective ways to deliver the same quality and quantity of services and evaluating how different levels of funding impact program results and outcomes.Six, there must be real leadership of program review from the top, including the Premier and Minister of Finance. This leadership should include approval of the procedures to be followed, the setting of criteria for the identification of reform options, instructions to spending ministries to cooperate in the process, and decisions on which reform measures to adopt.If the Smith government really wants to address its high spending, it needs to go beyond making incremental cuts “around the edges” and start asking some of the really tough questions: What are the government’s strengths, and where should it step back and allow others to take the lead? Should the government even be involved in a particular area? What results is the program or service actually achieving? Are there more effective ways to accomplish these goals? And what alternative models or approaches for delivery should the government consider using?For example, with a strong program review process in place, if the Smith government were able to hold its operating spending at 2025/26 levels of $67 billion over the next three years, it could return to a balanced budget in 2028/29. But this requires tough decisions by a program review process that is both robust and effective.A permanent, legislated program review framework is necessary to address the critical questions and provide the critical answers.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). During his tenure, he focused on best practices in program and spending reviews. In 2019, Mr. Kaplan served as Executive Director for the MacKinnon Panel on Alberta’s Finances, tasked with reviewing Alberta’s fiscal policies and recommending reforms.

KAPLAN: From deficits to downgrades — why Alberta must rein in spending before it’s too late

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