Fraser Forum

Government debt—the burden on Albertans continues to grow

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Government debt—the burden on Albertans continues to grow

At quick glance, you might think Albertans are fortunate to have a relatively low provincial debt burden. But that’s an incomplete and perhaps misleading story. In reality, the debt burden for Albertans is growing quickly.

Of course, the extent of government debt accumulation varies widely among the provinces. Some provinces have seen substantial increases in their debt burdens over the last decade or so, while a few have only seen marginal changes.

On a relative scale, Alberta appears to perform well compared to most other Canadian jurisdictions. The Government of Alberta currently carries approximately $36.6 billion in provincial net debt, which means every Albertan holds $8,379 in provincial debt, the lowest total of any province.

Moreover, Alberta also owns the lowest provincial debt-to-GDP ratio—a measure of fiscal sustainability—at just over 10 per cent. In contrast, provinces such as Quebec and Ontario have ratios nearly four times larger.

So, this is all good news for Albertans right?

Not so fast. The debt situation in Edmonton only looks better than other provinces because Alberta was one of the few provinces in a favourable fiscal position following the 2008-09 recession. If we dig a little deeper, we see the province actually has one of the fastest-growing debt burdens in the country.

At one point, the province had no net government debt—instead it had net assets of $35 billion in 2007/08. But in just over a decade the province’s net asset position has eroded by $71.7 billion, as the Alberta government has run repeated deficits. Since 2007/08, the province’s debt-to-GDP ratio has also increased 24 percentage points (from -13.4 per cent to 10.6 per cent), which is the largest increase of any province by a wide margin.

But there’s also federal debt to consider.

Of course, the debt burden faced by Albertans is not only due to policy decisions made in Edmonton, but in Ottawa as well. Albertans carry a significant portion of the $793.7 billion federal net debt and pay about 17 cents of every dollar in interest costs when the Ottawa adds more debt.

For this reason, you must look at both the federal and provincial levels of government to assess the true debt burden for Albertans.

Notably, Alberta’s portion of federal debt totals approximately $135.0 billion—almost four times the amount of their provincial debt, which means the province’s combined (federal and provincial) net debt equals $171.7 billion, a number that may surprise some people.

Consequently, government debt (per person) in Alberta extends far beyond the provincial total. Currently, each Albertan holds approximately $39,270 in combined government debt after accounting for both levels of government.

Unfortunately, the situation will likely get worse for Albertans before it gets better. The federal government expects to run a $28.1 billion deficit in 2020/21 and continue increasing debt, meaning the bill for Albertans could rise in the near future. The Alberta government also projects to add another $9.8 billion in net debt over the next three years.

Government debt is becoming more of a burden for Albertans with each passing day, regardless of which level of government it originates from. If Albertans want to see this reality change soon, they’ll need both Edmonton and Ottawa to demonstrate leadership and long-term thinking.

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