Squint and you can see Alberta’s budget surplus, before it potentially dries up

Premier Danielle Smith’s government will declare a $367-million budget surplus in a province where “deficit” may as well be a four-letter word. But if the actual oil price is just $1 US per barrel below what provincial economists forecast, that becomes a $263 million deficit.

Or let’s say the budget’s projection of $74 US per barrel overestimates the yearly average by $2.50 US per barrel, the rough amount by which officials overshot the price last year.

Hello, $1.2-billion deficit — and then an extra $630 million in red ink for every dollar the price drops below forecast.

That only begins to describe the razor’s edge upon which Finance Minister Nate Horner’s budget now rests. It’s a document he hailed as a “responsible plan (that) strikes the right balance.”

But this year’s surplus amounts to a tiny ooze of black ink, a mere 0.5 per cent of leftover after nearly all the $73.5 billion in provincial revenue gets spent.

Financial experts would call this a mere “accounting surplus,” and not the debt-busting fiscal result Albertans once got used to in days of plenty. Despite the topline figure, Alberta must still borrow $2.4 billion cash this year to meet infrastructure costs and other commitments, thereby pushing up the debt that Smith and Horner profess to deplore.

And there is a real potential that Alberta rapidly burns through the $2-billion contingency it’s set aside for disasters, given that the wildfires, drought and floods of last year cost the province $2.9 billion — and everyone appears to be bracing for even worse conditions this year.

Why are things so tight this year?

Oil and gas revenues are only slightly off the last two big-surplus years, and stand to clock in as the third-highest in Alberta history — and still higher than it was in Rachel Notley’s NDP budgets, all four years combined. 

Moreover, the nearly completed Trans Mountain pipeline expansion is supposed to give the province’s economy and fiscal coffers a further lift.

Alberta budgets have reached the point where even $17.3 billion of bitumen and natural gas royalties are barely enough to produce a microscopic, on-paper surplus.

For what, though? A fingernail’s width away from deficit, and what to show for it?

Dollar destinations

There are spending increases for health and education, but at paces that fall well behind inflation and the massive population growth Alberta is seeing — by 184,000 this fiscal year, another 175,000 next year, and 33,000 additional school-age students expected this summer.

Sure, there will be new schools built with Budget 2024’s (borrowed) money, long-awaited dollars for the Red Deer hospital, and a bevy of Deerfoot Trail upgrades near where all those signs sprang up before last year’s election.

But the Smith government is also slow-walking grants for other promised projects, including a 25-per-cent cut to what had been pledged for LRT expansions in Calgary and Edmonton.

To give a sense of how much expectation-dampening went into Smith’s post-election budget, this week’s big announcement of the launch of planning work for a new Edmonton children’s hospital served to pre-empt the big news that the province was shelving the proposed new south Edmonton hospital that was getting too big for its budgetary britches.

Another striking delay, and perhaps more than that, was the income tax cut that was the UCP’s centrepiece re-election promise last year. The new eight-per-cent rate that was supposed to be in place this past Jan. 1 will not be fully rolled out until 2027 (the next election year), and then only if Alberta’s finances are healthy enough to sustain the $1.4-billion revenue loss the cut would create.

In fact, the tax cut’s future is so tenuous that the budget doesn’t even calculate its impact once it’s supposed to be in place. Theoretically.

A reporter asked Horner what future generations would remember about this budget, as though us old-timers close our eyes and reminisce fondly about the transformative themes of Dick Johnston’s 1988-89 fiscal blueprint (it’s coming to me, dadgum). 

Horner spoke of “this balanced approach. We’re doing a few things. We’re saving for the future. We’re spending on the infrastructure we need today.”

Not the stuff of breaking-news headlines, in other words.

Even the Heritage Savings Trust Fund, after all the blue-skying from Smith last week about it ballooning to 10 times its value or greater, gets no dedicated contributions beyond the government reinvesting its interest. This budget doesn’t plump up future savings while also requiring a few billion dollars of borrowing and additional debt.

Real estate agents and homebuyers might remember Budget 2024 because it more than doubles the land-transfer tax to $955 on a typical home worth $450,000.

Green-minded drivers dreaming of getting an electric vehicle might remember this budget as the one that brought in Canada’s second extra registration fee for battery-powered cars and trucks, following the lead of Saskatchewan and many U.S. states.

It’s a fee that only dings owners of the low-carbon motor option that some other provinces choose to offer incentives for instead. It will also raise $5 million next year, compared with $1.4 billion that year from fuel tax.

The big, memorable pieces of this year’s budget might just have to wait for the middle of the year in fiscally volatile Alberta.

Gyrating oil prices could produce an outsized surplus or deficit, or far greater expenses could be required if El Niño and climate change conspire to wreak drought and wildfire havoc on this province.

Should any of that happen, any claims of a $367-million budgetary surplus will be a quaint memory — or utterly forgotten.