Alberta's Fiscal Restraint Era Ends with Massive Budget Deficit
The recent budget from the Alberta government has confirmed a long-standing suspicion among concerned Canadians: the era of fiscal responsibility in Canada is officially over. While the federal government has been accumulating large deficits and increasing debt since 2015, some provinces, notably Alberta under Premier Danielle Smith and New Brunswick under former premier Blaine Higgs, had previously managed to control spending and reduce debt. However, these examples of provincial fiscal restraint have now vanished, with New Brunswick's finances deteriorating after Higgs lost reelection in 2024.
Spending Surges Out of Control
Premier Danielle Smith remains in office, but over the past two years, her government has allowed spending to spiral out of control. Finance Minister Nate Horner delivered Budget 2026 late last month, which significantly raises spending, hikes taxes, and includes a staggering $9.4-billion deficit. This deficit represents nearly 13% of overall government revenue, a figure that highlights the government's unwillingness to rein in expenditures.
The Alberta government has attributed its budget woes to falling oil prices, but the sheer size of the deficit is directly linked to uncontrolled spending. Health-care spending is set to increase by nearly 6%, and education spending will rise by 7%. These increases, while potentially politically popular, are unsustainable given that inflation remains below 3%. Over the past two years alone, government spending has surged from $74.1 billion to $83.9 billion, marking a 13.2% increase or an average of 7.6% per year—far from the principles of fiscal restraint.
Tax Hikes and Broken Promises
In addition to spending increases, the budget introduces a host of tax hikes, contradicting the government's position as a defender of taxpayers' interests. A provincial property tax increase alone will cost taxpayers nearly $500 million this year, while new taxes on car rentals and higher vehicle registration fees add to the burden. The budget attempts to placate fiscal conservatives by noting that Alberta's tax structure saves individuals and businesses about $17 billion annually, but this offers little comfort following Horner's suggestion that Albertans may need to sacrifice some of this fiscal advantage to reduce dependency on resource revenues.
The government's deficit spending is not due to a lack of a provincial sales tax (PST). Even with declining oil revenue this year, royalties are projected at nearly $10 billion, far exceeding the $6 billion a 5% PST would generate. If spending had been held at levels from two years ago, the budget would be balanced, and even a freeze at last year's levels would halve the current deficit.
Breaking Fiscal Rules and Future Implications
By failing to control spending, the United Conservative Party government is violating its own legislation, which prohibits more than three consecutive budget deficits. The budget projects ongoing deficits, with Horner acknowledging the breach: "We created these rules, and I'm breaking them," he said. "So, it bothers nobody more than it does me." Every Albertan should be concerned by these poor budget choices, as they mirror a broader trend among provincial finance ministers opting for deficits and tax hikes over spending control.
If Canada wishes to avoid a 1990s-style debt crisis, leaders at both federal and provincial levels must take action. The spending growth seen in budgets like Alberta's is reminiscent of the behavior that led to past fiscal crises. It is imperative to implement spending freezes and actual cuts to get spending under control. Placing a greater burden on future taxpayers is not a viable solution; while it may be politically convenient, it is not the right course of action for long-term economic stability.
