A decade of spending increases above inflation and population growth hindering Alberta government’s efforts to weather low energy prices

Press Releases

February 19, 2015

CALGARY—The Alberta government’s spending increases over the past decade—soaring $49 billion higher than inflation plus population growth would require— have hindered its ability to balance its books in the shadow of falling energy revenues, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“Over the past decade, the Alberta government has significantly increased spending on items such as unreformed public-sector pensions and labour agreements that were double the rate of inflation, putting the province on tenuous financial footing,” said Mark Milke, study co-author and Fraser Institute senior fellow.

The study, Fumbling the Alberta Advantage: How Alberta Squandered a Decade of High Energy Prices, calculates that between 2004/05 and 2013/14 program spending jumped to $43.9 billion (or $10,967 per person) from $29 billion (or $8,965 per person).

Had spending increases simply been restricted to inflation plus population growth, the province would have saved $49 billion over the past decade, giving the current government an additional $8 billion in fiscal room in the 2013/14 budget.

“In recent interviews, Premier Jim Prentice has warned that the drop in oil prices will drain $7 billion from expected government revenues. But this ignores the effect of past decisions to ramp up program spending beyond inflation and population growth which is just as much responsible for the current budget gap,” Milke said.

The study also notes that the increase in program expenditures has constricted present government choices on everything from capital spending, to tax relief to deposits into the Alberta Heritage Savings Trust Fund — the last government deposit into the province’s rainy day fund happened in 2006/07.

“Oil revenues aside, if the current Alberta government wishes to have a better menu of fiscal choices in the future, it must carefully control expenditures,” said Milke.

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