Budget 2017—Alberta government burning through assets at alarming rate
By now, Albertans have heard that for a second year in a row, the provincial government plans to run a budget deficit of more than $10 billion. While those numbers are especially large, the unfortunate reality is that budget deficits are nothing new to Albertans. The fiscal plan presented in this year’s budget shows that between 2008/09 and 2019/20, the province will have only presided over a single balanced budget.
This nearly unbroken string of budget deficits is taking a substantial toll on Alberta’s finances. The province entered the financial crisis with $35 billion in net financial assets (all financial assets minus liabilities). However, by 2016/17, Alberta’s debts exceeded its financial assets for the first time since 2000/2001.
Looking forward, Alberta’s debt is projected to keep climbing. While the budget only projects to 2019/20, the finance minister previously stated that the budget will not be balanced until sometime in the next decade. But while we don’t know how much debt the government is likely to add by the time the chronic deficits are over, we do know that by 2019/20 the budget estimates that the province’s net debt will reach $45 billion (see graph below). That would mean that in 12 years, the provincial government will have seen its net assets decline by $80 billion—nearly $7 billion per year.
To put this in context, consider that between 2008/09 and 2019/20, the provincial government’s assets are projected to decline by $1,500 per person per year. Over the entire period, that amounts to just over $18,000 per person.
Refusing to pay for that spending today means future generations will foot the bill. The $35 billion nest egg Albertans built up is gone, only to be replaced by a $45 billion bill. And that assumes the provincial government manages to avoid further spending increases beyond those it’s already planning, that its revenue projections are correct, and that it doesn’t run further deficits beyond 2019/20.
Debt accumulation is a serious problem in this province, and it has been since 2008/09. Unfortunately, there does not appear to be a plan to return to budgetary balance in the foreseeable future. This will further erode the province’s assets, and mean more money going to service the debt rather than pay for tax relief and programs Albertans value.