Economists unsurprised by big Alberta deficit given low prices for oil

Questions are being asked about how Alberta got to its current financial deficit and what's next for the province. CTV News Edmonton's Jeremy Thompson reports.

Alberta’s budget for the coming fiscal year, which carries a $9.4-billion deficit, comes as little surprise to economists as the province continues to count on oil revenues to balance the books.

The deficit is the largest since the COVID-19 pandemic.

Finance Minister Nate Horner said Thursday that costs associated with supporting a population that grew over the last few years, along with low oil prices and global economic uncertainty, are affecting provincial coffers, but that the government needs to spend to bolster core services such as health care and education.

Horner’s forecast calls for deficits over the next three fiscal years: $9.4 billion in 2026-27, $7.6 billion in 2027-28 and $6.9 billion in 2028-29, while posting a $4.1-billion deficit for the current fiscal year ending in March

The province projects West Texas Intermediate – the benchmark oil price for Alberta’s economy — to average US$60.50 a barrel in the upcoming fiscal year, not nearly enough to balance the books.

Alberta doesn’t have a provincial sales tax and has comparatively low business and personal taxes.

“We’ve got to take Albertans with us on this ride,” he said Thursday.

Moshe Lander, an Alberta-based economist for Montreal’s Concordia University, says it’s no surprise Alberta doesn’t have a plan right now to return to balance given the province relies so heavily on non-renewable resources for which they don’t control the price.

“It’s a global commodity that’s determined by global forces,” Lander told CTV News Edmonton on Friday. “We know all too well in Alberta that when the price falls through the floor, so does the budget. The interesting thing is that the dollar amount that’s needed to balance the budget, the premier said, was around $74 a barrel.”

He said the reason why the province is forecasting large deficits is that it has “lost control over spending.”

“It’s not to say that spending on teachers is bad or spending on health care is bad,” Lander said. “You can’t blame this on immigrants. The province has been growing steadily, even beyond just the last couple of years. It is a government that does not fundamentally know how to control the economy.”

And some of the reasons why the Alberta government’s budget is in a deficit position is because of recent pay hikes for health and educational staff, says Taylor MacPherson, an economist with public policy think-tank MEI.

“What we saw was this big increase in public sector compensation, yet we’re not seeing an increase in hours worked,” MacPherson told CTV News Edmonton while pointing out a 16-per-cent increase in public-sector compensation set over a two-year period, from March 2025 to March 2027, corresponding with a 13-per-cent increase in overall operational spending. “Full-time equivalency has not changed much, so what we’re seeing is this increase in compensation without an increase in work ... 16 per cent is a big number.”

Politically, the rise in spending is sure to please Albertans who wanted to see the government address the many needs in health care and education, but are likely to run afoul of those who think it should live up to its name, political analyst John Brennan told CTV News Edmonton on Friday.

“The words ‘deficit’ and ‘debt’ have negative connotations, especially for fiscal conservatives, and you would think a provincial government that has the word ‘conservative’ as their middle name would be somewhat conservative, but this is not fiscally conservative at all,” Brennan said, pointing out the province is setting aside $3.4 billion this year for service interest on the debt, increasing to $4.9 billion for 2028-29.

“It is a big spending budget, so I think where they are going to get criticism is probably going to come from the business community and Albertans, citizens who are fiscally conservative, because they’re not going to like to see this big ramp up in spending.”

With files from CTV News Edmonton’s Jeremy Thompson