Alberta government increased spending despite promise of ‘restraint’

Last month, the Smith government tabled its budget for the upcoming fiscal year, projecting modest surpluses. But when relatively high resource revenue inevitably declines, the government may fall back into deficit due to its high spending. Premier Smith recognized this risk in her recent address to the province and promised spending “restraint” and less reliance on resource revenue. But Albertans must consider this “restraint” within the context of the Smith government’s spending increases thus far.

First, let’s take a closer look at the numbers in budget 2024.

The Smith government plans to increase spending by less than inflation and population growth. Program spending (excluding debt interest costs) will increase from a projected $67.3 billion in 2023/24 to $73.0 billion in 2026/27—however, after adjusting for changes in inflation and population, program spending will decline each year from a projected $14,683 per person in 2023/24 to $13,750 by 2026/26. In other words, the Smith government plans to reduce spending.

And such spending restraint is an important step forward. But this restraint comes on the heels of a large spending increase by the Smith government.

Specifically, compared to the original plan in the 2022 mid-year fiscal update, the government has increased program spending by a projected $6.1 billion in 2023/24 and $7.8 billion in 2024/25. Put differently, despite the spending “restraint” in the 2024 budget, the Smith government plans to spend $13.9 billion more (over two fiscal years) than it originally planned in mid-year 2022.

Consequently, after adjusting for inflation and population growth, the Smith government will spend a projected $1,175 more per person in 2023/24 than originally planned in the 2022 mid-year and $1,218 more per person in 2024/25. In total, the Smith government plans to spend $2,393 more per Albertan over two fiscal years—that doesn’t sound like much spending restraint.

Put simply, despite the Smith government’s plan to grow spending below the rate of inflation and population growth, projected spending has actually increased since the 2022 mid-year fiscal update. And once again, higher spending means Alberta has increased its reliance on volatile resource revenue—not reduced it. As a result, Alberta faces a higher risk of falling back into budget deficit than it would have if the Smith government simply stuck to its original spending plan just a year and a half ago.

The government’s commitment to spending restraint is an important one. However, due to a significant increase in spending since the original plan, the Smith government must rein in spending by more than outlined in the 2024 budget to truly stabilize finances and avoid deficits when historically high resource revenue inevitably declines.