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Alberta's $22-billion Lost Opportunity

Type: Research Studies
Date Published: February 19, 2013
Authors:
Research Topics:
Government Spending

Alberta’s $22-Billion Lost Opportunity calculates the economic cost of the province’s inability to hold government spending to the rate of inflation plus population growth. The report examines the history of Alberta budgets starting in fiscal year 2005/06 up until 2012/13 and concludes that successive Alberta governments failed to control spending and plan for fluctuating resource prices.

A review of actual choices governments made shows a pattern of increased program spending well above the rate of inflation and population growth and as a result, a string of five consecutive deficits. The report calculates that after inflation and population growth are factored in, Alberta program spending rose to $10,526 per person in 2012/13 from $9,594 in 2005/06.

In total, if Alberta’s governments had held program spending increases to the rate of inflation plus population growth since 2005, the province would have spent $22.1 billion less than it did. In the current year alone, program spending is $3.6 billion higher than it would have been if spending increases matched the rate of inflation plus population growth since 2005. Additionally, the province would have run a surplus budget in every budget year since, including during the 2008/09 recession.

It concludes that if the Alberta government is serious about balancing its budget, then it should consider the following options:

  • Provide annual estimates of public sector compensation costs in the broad public sector relative to provincial government expenditures;
  • Review overall public sector compensation with an eye to bringing such compensation in line with the private sector;
  • Freeze overall spending growth for a time to make up for past increases that far outran population and inflation growth in Alberta; and
  • Commit to holding any future program spending increases to the rate of inflation plus population growth.
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