There is a uniqueness to Alberta’s annual budget unveiling. The ritual alternates between celebratory and funereal, thanks largely to an overreliance on the volatile prices of oil and gas. Great budget or disastrous budget. Surplus or deficit. Sometimes year-to-year. Sometimes all in the same year.
Alberta’s 2011–2012 budget, for example, initially forecast a $3.4-billion deficit… but turned out to be pretty much balanced. A relatively good year. Not so in 2020–2021, when a bleak $7-billion projected deficit at the start of the year morphed into a behemoth $17-billion hole thanks to the price of oil plunging—at one point turning negative—during the pandemic.
On February 28 this year, just two days after finance minister Nate Horner introduced our latest budget, oil prices began spiking when the US and Israel attacked Iran. High prices will pump more revenue than anticipated into Alberta’s treasury in the short term but create more long-term uncertainty. The fact remains, this year’s outlook is bad enough that Horner should have used pallbearers to carry the budget documents into the legislature, weighed down as they were by a $9.4-billion deficit. That’s on top of last year’s $4-billion deficit. And in anticipation of deficits the next two years: $7.6-billion and $6.9-billion.
Smith is blaming this mess on Alberta’s reliance on oil prices, a burden she says she inherited from previous governments and thus could do nothing about last year, this year or in coming years. As someone who in the 2023 election campaign vowed to deliver balanced budgets, Smith has now created another scapegoat: too many immigrants “flooding” Alberta, overwhelming schools and hospitals. That’s thanks to Justin Trudeau, says Smith, as she continues to use the former PM as a punching bag. (Never mind that just two years ago Smith herself announced an “aggressive target” to double Alberta’s population through immigration, to give the province more clout in Ottawa.)
On the eve of Alberta’s last election the newly minted premier was revelling in a record budget surplus of $11.5-billion, buoyed by a record $25-billion in resource-driven income. Now, reality is slapping us all in the face, and we really should pay attention—particularly the separatists in our midst. Much of their fever dream relies on energy revenue, lots of it, pouring into the provincial treasury every year. They argue that, post-separation, Albertans will be financially better off, paying lower taxes, enjoying annual budget surpluses of $20+ billion, heading into retirement like Scrooge McDuck high-diving into a pool of money. If only, they insist, Albertans had the courage to separate. It all sounds so simple and easy.
Now, fiscal reality is slapping us all in the face, and we really should pay attention— particularly the separatists.
It would be neither, of course. Insurmountable troubles would face an independent Alberta—assuming such a lonely creature could even be created. A province can’t unilaterally separate. First Nations are loudly opposed. Poll after poll shows a strong majority of Albertans reject separation. And many writers, including my fellow Alberta Views columnist Paula Simons, have waxed eloquent about the strengths, values and shared history of Confederation and Alberta’s place in it.
But such sentiments don’t sway those who view separation through the perspective of the dollar. As University of Calgary economist Trevor Tombe pointed out in a Hub column last summer, “Alberta’s separatist impulse is different [from Quebec’s]—it’s almost entirely about money.” He then dismantled separatists’ visions of a utopian state, using as an example Britain’s diminished economy post-Brexit: “A separate Alberta would be a poorer Alberta.”
Smith and separatists say Alberta contributes more money per capita to the federal government than any other province. Yes, but that’s because Albertans have higher salaries and thus pay more in federal taxes. We’re not being unfairly milked. And speaking of per-capita arguments, at the height of the pandemic Alberta was receiving more monetary support per capita from the federal government than any other province. A prolonged slump in the price of oil could see Alberta one day becoming a recipient of equalization.
Smith has started reinvesting in the Heritage Savings Trust Fund as a way to counter the province’s overreliance on oil and gas prices, hoping to build the current $31-billion account to at least $250-billion by 2050. But that plan, ironically, relies on continued oil and gas revenue windfalls.
In the past Alberta spent non-renewable energy income pretty much as fast as it came in. It’s a chronic and destructive pattern that politicians have followed with the willing support of voters. Lougheed and Klein enjoyed massive oil/gas windfalls and could do no wrong. Every other premier since then has been unlucky and booted from office, by party or voters. Smith was lucky three years ago. But no longer.
The fate of Alberta premiers is too often decided by luck, by a roll of the oil-price dice. So too would be the finances of a separate Alberta—a poorer Alberta.
Graham Thomson is a political analyst, member of the Legislature Press Gallery and former Edmonton Journal political columnist.
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