A report released on Friday by the Fraser Institute, a public policy think-tank, says excessive government spending is to blame for Alberta’s deficit.
The study said if the Alberta government had held the line on spending over the past four years, it would have balanced the budget in 2018-19 instead of having a $6.7-billion deficit.
“Spending is the root cause of Alberta’s deficit, and despite reasonably strong government revenue since 2016, the province has made no progress reducing the deficit over the past five years,” said Steve Lafleur, senior policy analyst at the Fraser Institute and co-author of Spending Beyond Our Means: Addressing the Root Cause of Alberta’s Deficit.
“Successive governments in Edmonton have dug a deep hole for Alberta’s finances, so if the current government wants to return Alberta to fiscal stability, it must reduce and reform spending.”
The Fraser report said the Alberta government spends 18.5 per cent more (per person) than the British Columbia government. For example, 15 years ago, B.C. and Alberta spent the same amount on a per-person basis. Today, however, Alberta spends $12,622 per person compared to $10,647 in B.C.
“As the Alberta government prepares to release a blue-ribbon panel report on the state of the province’s finances, Albertans should understand why there’s so much red ink in Edmonton,” said Ben Eisen, senior fellow at the Fraser Institute.
The institute said Alberta spends per person more than every large province in Canada including Quebec ($11,200 per person) and Ontario ($10,472 per person), “with no evidence that Albertans enjoy better public services than residents of the other provinces.”
“If the Alberta government reduced program spending by 10.9 per cent over three years, it could eliminate the deficit and create fiscal room to restore the now-defunct ‘Alberta Advantage’ by providing tax relief for Albertans,” said the report.
The report said Alberta’s revenues declined steeply following the downturn in commodity prices that began in late 2014-15 and the subsequent recession. That revenue decline contributed to a series of substantial budget deficits. However, despite the large deficits, the provincial government continued to increase nominal spending, which made the problem worse.
“The government could have learned from the experiences of other provincial governments that reduced and reformed spending to eliminate large deficits—including the NDP government in Saskatchewan led by former premier Roy Romanow during the 1990s. Instead, Alberta’s government took what had become the status quo approach, and continued to increase spending. Partly because of its policy choices, the province’s large deficits have persisted.”
On Tuesday, the United Conservative Party delivered its first-quarter fiscal update, with a focus on debt and interest costs.
Finance Minister Travis Toews said Alberta is paying $93 million on debt-servicing costs instead of using the money on services and programs.
The previous NDP government projected debt to hit $120 billion by March 2024, the government said. The debt was $62.7 billion on March 31, 2019.
The UCP government plans to table its first budget in late October.
Mario Toneguzzi is a Troy Media business reporter based in Calgary.