TEGAN HILL: Albertans will pay for Smith’s big budget deficits

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The Smith government recently tabled its budget for the 2025-26 fiscal year. Unfortunately, the document was drenched in red ink with budget deficits projected from 2025-26 to 2027-28 — and it will cost Albertans.

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Specifically, the government projects a $5.2-billion budget deficit in 2025-26, including a $4-billion contingency (or buffer) for hard-to-predict spending (e.g. tariffs, public-sector bargaining, natural disasters). And budget deficits over the following two years, including contingencies.

If these budget deficits come to fruition, the Smith government projects net debt (total debt minus financial assets including the Heritage Fund) will increase from approximately $37 billion in 2024-25 to nearly $50 billion by 2027-28. As a result, every man, woman and child in Alberta will carry an estimated $9,693 in provincial government debt by the time the government’s fiscal plan ends in 2027-28.

Why should Albertans care?

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Because like individual or household debt, we must pay interest on government debt.

The Alberta government’s debt interest costs will exceed a projected $3.6 billion or $700 per Albertan by 2027-28. For perspective, that’s more than half the projected budget for advanced education that year. Every dollar spent on debt interest is one less dollar available for priorities such as education and health care or even tax relief. In fact, Albertans may face higher taxes in the future to pay for today’s debt accumulation.

Today’s fiscal deterioration is in stark contrast to Alberta’s debt-free days in the mid-2000s under former premier Ralph Klein, when interest payments were negligible.

Back then, the Klein government substantially reduced spending and essentially restructured the government while improving efficiency in delivering programs and services to Albertans. Specifically, from fiscal years 1992-93 to 1996-97, the government reduced per-person program spending from $11,040 to $7,447 — a reduction of approximately $3,600 per person — and quickly balanced the budget and reduced net debt, despite relatively low resource revenues (such as oil and gas royalties) over the period. (All numbers adjusted for inflation.)

For perspective, the Alberta government’s inflation-adjusted program spending is projected to eclipse $15,000 per person in 2025-26.

The impact of government finances on everyday Albertans can sometimes be difficult to see. But make no mistake; Albertans will shoulder the burden of government debt accumulation. To turn things around, the Smith government must rein in spending and reduce the debt burden on Albertans and their families.

Tegan Hill is director of Alberta policy at the Fraser Institute.

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