Balanced budget out of reach for Alberta: report
Net debt will balloon from $9.5 billion to $44 billion by 2020.
OTTAWA — A slow rebound in royalties and corporate tax revenues will help shrink Alberta’s deficit over the coming years. But the process will be slow and the deficit is expected to remain around $6.8 billion by 2019-20.
In that time, net debt will balloon from $9.5 billion to $44 billion and debt charges will double from $1 billion to $2.3 billion, according to The Conference Board of Canada’s Alberta Fiscal Snapshot.
Resource royalties and corporate tax revenues will begin a slow rebound to help Alberta’s deficit marginally improve from $10.8 billion last year to $6.8 billion in 2019-20. Meanwhile, net debt is expected to rise from $9.5 billion to $44 billion by 2019-20.
With nearly two-thirds of revenue growth expected to come from resource royalties and corporate taxes, the province’s fiscal outlook remains dependent on volatile commodity price swings.
After falling by 13% from its 2014-15 level in 2016-17, Alberta’s government revenues are expected to grow by an average of 6.1% over the next three fiscal years. Nearly two-thirds of this revenue growth will come from increased royalties, revenues from the provincial carbon tax, and higher corporate taxes. Resource royalties are estimated to reach $6.1 billion by 2019-20, still below the average $9.2 billion seen between 2010–11 and 2014–15.
Contributing to Alberta’s continued deficits is its relatively high level of health care spending. In 2014, age-adjusted health care spending per capita in Alberta was $5,178—the highest out of all the provinces and 34% above the national average.
Last fiscal year, 48% of every revenue dollar earned by the province was dedicated to health care spending. Containing growth in health spending will be key to the province achieving its deficit-reduction target.
The provincial government plans to keep program spending increases capped at 1.9% over the next three fiscal years by limiting growth in health care and education spending. The government plans to keep health care spending increases to an average annual pace of about 2.9% over 2017-18 to 2019-20, a significant slowdown from the average annual rate of 6.7% in the last 10 years.
The Conference Board projects that health care spending in Alberta would have to grow by an average pace of 4.8% per year over the next two fiscal years just to keep pace with inflation and demographic changes in the province.