Tegan Hill: Alberta to pay for Smith’s big budget deficit

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The Smith administration recently proposed a budget for the fiscal year 2025-26. Unfortunately, the document is soaked in red ink and is expected to be from 2025-26 to 2027-28, which will cost Alberta the damage.

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Specifically, the government has booked a $5.2 billion budget deficit in 2025-26, including $4 billion in contingency costs (or buffers) for unpredictable expenditures (such as tariffs, public sector negotiations, natural disasters). Over the next two years, including unexpected situations.

If these budget deficits are achieved, the Smith administration will project net debt (total financial assets including the estate fund) from approximately $37 billion in 2024-25 to nearly $50 billion in 2027-28. As a result, by the end of the 2027-28 government fiscal plan, every man, woman and child in Alberta will be expected to bear about $9,693 in provincial government debt.

Why should Alberta take care of?

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Because like personal or household debt, we have to pay interest on government debt.

By 2027-28, the Alberta government’s debt interest cost will exceed the estimated $3.6 billion or $700 per Albertan. From a perspective, this is more than half of the estimated budget for advanced education that year. Every dollar spent on debt interest is reduced by one dollar, such as education and health care and even tax exemptions. In fact, Alberta may face higher taxes in the future to cover the accumulation of today’s debt.

Today’s fiscal deterioration contrasts sharply with former Prime Minister Ralph Klein’s debt-free days in Alberta in the mid-2000s, with interest payments negligible.

At that time, the Klein government significantly reduced spending and essentially reorganized the government while improving the efficiency of providing programs and services to Alberta. Specifically, from fiscal 1992-93 to 1996-97, the government reduced planned expenditure per person from $11,040 to $7,447 (a reduction of about $3,600 per person) and quickly balanced budget and net debt, despite relatively low resource incomes such as oil and gas and gas expenses, which was relatively lower than that period. (All numbers have been adjusted to inflation.)

From a perspective, the Alberta government’s inflation-adjusted planned spending is expected to be $15,000 per person over the 2025-26 solar eclipse.

The impact of government finances on the daily Alberta is sometimes difficult to see. But there is no doubt that Alberta will bear the burden of government debt accumulation. To turn things around, the Smith administration must curb spending and reduce the debt burden on Alberta and its families.

Tegan Hill is a director of Alberta Policy at the Fraser Institute.

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