An unremarkable sea of red

Alberta Finance Minister, Nate Horner, had the difficult task of delivering another deficit budget yesterday in Edmonton. Given the decline in global oil prices, many observers were expecting a rather large deficit budget that could reach double-digit levels in the billions. The only positive thing that could be said about this particular budget is that it could be worse… a lot worse. Alberta’s government estimates total revenue to reach $74.6 billion, while total expenses will be $83.9 billion. This leaves a provincial budgetary deficit of just under $9.4 billion for the fiscal year of 2026-27. Based on the latest figures, Alberta will post the fourth highest provincial deficit in Canada, behind British Columbia, Ontario, and Quebec. Only Saskatchewan can brag about achieving near balance.

Budgeting in Alberta is always a challenge because department officials have the unenviable task of pegging the entire enterprise on a single data-point they have absolutely no control over: the market price of oil. Alberta’s government is pegging the benchmark West Texas Intermediate (WTI) oil price at an average of US$60.50 per barrel for 2026-27. This is lower than prior forecasts and is even down from assumptions around $71 in earlier quarterly projections for the same period. Every US$1 change in WTI impacts revenue by about $680 million. Alberta’s budget needs $74–$77 per barrel to achieve balance.

Not unlike other provinces, healthcare and education continue to be the top drivers for spending. Healthcare is expected to take $34.4 billion in total spending (an increase of 6% from a year prior), while education will consume $10.8 billion (a 7% increase). Other major drivers of spending will include spending on infrastructure and social services. Operating expenses are a significant cost pressure for this government; however they will have bought themselves labour peace before the next election with many collective bargaining agreements (teachers notwithstanding) settled through negotiations. All told, this is a budget that is very much focused on maintaining public services for everyone with almost no major cuts.

And that’s the problem for this government. Where do they go next? Will they cut services? That’s highly unlikely as 2027 is an election year. What about oil prices? Sure, we can all pray that we don’t squander the next boom. That leaves one last option: increasing taxes. In a province without one since 1936, is a provincial sales tax (PST) in the offing? You don’t need to be an economist to know that a PST would solve a few of Alberta’s fiscal problems. After the 1936 sales tax, it was repealed 18 months later after a massive public outcry. This would be a tough pill in Alberta in 2026.

Late last week, Premier Danielle Smith addressed the province, telling voters that on October 19, 2026 they will be heading to the polls to vote on a number of questions ranging from constitutional matters to immigration policy. Voters do have options; they could garner enough signatures to get a PST question on the ballot. But while a PST referendum question is possible it remains unlikely. Still, Alberta maintains the lowest net debt-to-GDP ratio among the provinces—well below Ontario, Quebec, and British Columbia’s levels. But with no path to balance at the moment deficits will remain on the government ledger, and Ralph Klein’s “Alberta Advantage” survives yet another year.

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