Alberta government should adopt fiscal sustainability analysis and reporting framework

With the passage of Alberta’s new fiscal framework in March 2023, it was disappointing to see the Alberta government, once again, fail to include long-term fiscal sustainability analysis and reporting within its set of legislated fiscal rules.

The OECD defines long-term fiscal sustainability as “the ability of governments to maintain the public finances at a credible and serviceable position over the long-run in light of the prevailing mix of spending and revenue policies and taking into account debt servicing costs and future socio-economic and environmental factors that challenge… budgets.”

For years, analysts have recognized the need for long-term fiscal sustainability analysis and reporting in Alberta. For example, in 2018, with my assistance as a primary consultant, Alberta’s auditor general’s published a commentary (Putting Alberta's Financial Future in Focus), followed in 2019 by the MacKinnon Report on Alberta Finances, where I served as executive director. And between 2018 and 2023, Trevor Tombe, professor of economics at the University of Calgary, has published various perceptive analyses of Alberta’s long-term fiscal future.

Long-term fiscal sustainability analysis and reporting is a critical tool for managing the unique risks associated with a resource-based economy like Alberta’s. Dealing with the volatility of energy revenues requires more robust fiscal planning than found in the three- to five-year fiscal outlook process. Effective systems and processes for long-term fiscal sustainability analysis and reporting will help government decisionmakers and Albertans understand and protect the sustainability of government finances, support the efficient allocation of scarce financial resources, and anticipate and respond more effectively to economic and fiscal challenges and pressures today and in the future, including an aging population and the acceleration of the energy transition.

Global developments show that Alberta is clearly being left far behind when it comes to long-term fiscal sustainability analysis and reporting. Beyond the OECD, IMF and World Bank, the governments of Australia, Australia (New South Wales), New Zealand, Norway, the United Kingdom, the United States, and the Province of Ontario, all publicly report on long-term fiscal sustainability.

It's time for the Alberta government (specifically, the Ministry of Treasury Board and Finance) to finally formalize long-term fiscal sustainability analysis and reporting within government fiscal planning processes and systems, and to enact a legislated requirement for the preparation and release of a long-term fiscal sustainability report published every three years. Key elements of a long-term fiscal sustainability analysis and reporting framework for Alberta should:

• establish robust systems and processes within government to analyze and report on the medium- to long-term fiscal impacts of Alberta’s demographic, economic and fiscal risks and challenges, and the medium- to long-term impacts of government policies
• establish a definitive time horizon (10-years or longer) for long-term fiscal sustainability analysis and reporting within government
• prepare and publicly release a comprehensive long-term fiscal sustainability report at least once every three years, and provide useful information on long-term fiscal sustainability that’s understandable to Albertans
• establish a statutory or legal requirement for long-term fiscal sustainability reporting in the province’s new fiscal framework (the Sustainable Fiscal Planning and Reporting Act) similar to Ontario, as a show of government commitment to managing future long-term risks and challenges in a prudent manner.

If the Alberta government is truly committed to restoring Alberta’s leadership role in global financial transparency and accountability circles, it should follow the lead of other jurisdictions by finally including long-term fiscal sustainability analysis and reporting as a critical element in its new fiscal framework. Frankly, it’s long overdue.