February 16, 2021

Episode #32: Alberta’s Spending & Revenue Problem—Examining the Provincial Fiscal Model and How to Fix It

Alberta has a revenue and expense problem. For years, we have undertaxed and overspent, and now the debt is racking up and concerns over Alberta’s fiscal sustainability (the ability to manage debt over the long term while provide quality goods and services at a given tax rate) are looming large. While COVID has magnified this problem, there are several long-term factors that have underpinned Alberta’s revenue and expenditures, including but not limited to

  • revenues highly dependent upon volatile and declining resource royalties;
  • a relatively low tax burden on Albertans, combined with sluggish economic growth; and
  • per capita spending levels that are 11% higher than the average of the other nine provinces;

These divergent trends—declining revenues and rising expenditures—have caused Alberta’s fiscal situation to deteriorate dramatically. And even though overall debt levels remain manageable today, they are increasing rapidly, with no clear path to budget balance or fiscal sustainability.

So, why does this matter? And how do we address these challenges?

On this episode, BCA’s own economists Mike Holden and Alicia Planincic share their findings in advance of the release BCA’s new policy paper, Towards a Fiscally Sustainable Alberta: A Review of Provincial Government Finances, which examines our historical revenue and expense profiles and recommends some broad actions to tackle this big challenge—from a discussion of a sales tax to ways to grow our tax base.

In This Episode:

  • Defining fiscal sustainability
  • Alberta’s current overall fiscal situation and our concerning trajectory
  • Driving factors that led to our current fiscal challenges (declining revenues and rising expenses)
  • Why now is the time to examine and fix our fiscal model
  • Impact of COVID on Alberta’s fiscal situation
  • How Alberta’s current revenue structure contributes to our challenges
  • Criteria for evaluating options for re-imaging our revenues
  • Recommendations to improve our revenue profile, including an HST and Alberta consumer carbon tax
  • The importance of addressing our fiscal challenges now
  • The role that overall economic growth has in fiscal sustainability
  • What we need to get right in creating our path to fiscal sustainability

Resources Mentioned:

  • Towards a Fiscally Sustainable Alberta: A Review of Provincial Government Finances (to be released soon)

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