A Primer on the Government of Alberta's Budget

Abstract

Provincial budgets may normally make for dry reading, but in Alberta’s case, there is plenty of suspense lurking inside the pages — and that’s not necessarily a good thing. Your average family may know certain things about balancing a budget: keeping spending roughly in line with income; not relying on volatile, unpredictable income streams to cover expenses; and not leaving the kids with an inheritance of significant debt. But look at how Alberta has been managing its budget in the last decade, and it is obvious that the provincial government is breaking a lot of the financial management rules that most Albertans are disciplined enough to live by at home. A clear way to get a sense of how the Alberta government has managed its finances is by analyzing how much provincial program spending relies on depleting provincial savings, either in the form of savings funds or non-renewable resource deposits, such as oil and gas. By 2011, Alberta’s “Budget Gap” had grown to almost the same level it was in 1993, when the province was forced to adopt wrenching budget cuts in order to close what had become a yawning gap between revenue and costs amounting to $4,000 in spending for every man, woman and child in the province. This paper suggests there are three key questions that should be posed to our government and to any political party seeking to represent our interests as our government: 1. How tolerant are they of annual deficits? Do they advocate a strategy of relatively lower levels of government spending and/or higher tax rates, so as to avoid deficits no matter the state of the economy? Or will they tolerate deficits during economic slowdowns to enable higher levels of spending and/or lower tax rates? 2. To what extent are they willing to trust the payment of health-care costs and the costs of education and social assistance to oil and gas royalties as opposed to taxation? 3. How, exactly, does one define investments in social infrastructure; investments that can be funded by borrowing or by spending non-renewable resource royalties? What limits should be put on borrowing to fund such expenditures?