It is the smallest budget surplus since the governing UCP first started projecting balanced budgets in 2022, and relies on additional borrowing of just under $2.4 billion in 2024-25

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Alberta’s 2024 budget is projecting a slender surplus of $367 million that’s built on the back of borrowing and comes amid cooling oil prices and rising expenses.

The province now finds itself in a negative cash position due to accounting adjustments and borrowing needs, though its books reflect an accounting surplus as defined by the government when its expenses are lower than its revenues during the fiscal year.

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It is the smallest budget surplus since the governing UCP first started projecting balanced budgets in 2022, and relies on additional borrowing of just under $2.4 billion in 2024-25.

Before unveiling the budget, Finance Minister Nate Horner said the plan aims to balance saving for the future and ensuring public spending is sustainable.

“We’re reducing our debt where and when we can, saving for the future and responsibly growing our economy,” he said.

“This is a budget built for today and for tomorrow.”

Horner rejected assertions that the surplus was misleading, but conceded the province would require a $3-billion surplus to avoid further borrowing.

“It’s confusing,” he added.

He cited debt servicing costs escalating to $3.4 billion, a growing population, and the need for a contingency fund as among the reasons why the budget had been pushed to being on a knife’s edge.

“We’re taking a hard look at our financial situation from all angles,” Horner said.

The surplus for 2023-24 is now projected to be $5.2 billion. Of that, $3.2 billion will go into repaying debt, while $2 billion will be put towards the Heritage Savings Trust Fund, boosting it to more than $25 billion.

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Alberta’s revenue is estimated to be $73.5 billion in 2024-25, a drop of $2.1 billion from last year’s third-quarter forecast. That decline is mainly driven by oil prices that have remained near the US$74 mark they were at this time last year, down from the projection of an average US$79 per barrel used in last year’s budget.

The province is now projecting surpluses of $1.44 billion in 2025-26 and $2.64 billion in 2026-27.

Alberta’s debt — including taxpayer-supported debt, self-supported debt, and money lent to government-business enterprises — is now forecast to be around $95 billion in the upcoming fiscal year, and projected to rise to $97.7 billion the following year, and again up to $99.5 billion the year after that.

Meanwhile, total expenses are up 3.9 per cent as the province expects to spend $73.2 billion in 2024-25, an increase of more than $3 billion since last February’s pre-election projection for 2023-24.

Spending held below inflation, population growth

There is no extra cash allocated at the end of the 2024-25 year to go to the Heritage Fund, nor does the government expect to put more money into repaying debt in 2024, 2025, or 2026.

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Still, the province aims to grow the Heritage Fund to between $250 billion and $400 billion by 2050. Horner said not raiding the rainy day fund, and retaining $1 billion in investment earnings, will help grow the Heritage Fund over the long term.

“The retained earnings is the key,” he said.

Alberta Finance Minister Nate Horner
Finance Minister Nate Horner delivers the 2024 provincial budget at the Alberta legislature in Edmonton on Thursday, Feb. 29, 2024. Photo by David Bloom /Postmedia

As telegraphed by Premier Danielle Smith in a television address last week, spending will fall short of population growth and inflation in the province, measured at 8.7 per cent in 2022-23, and at 7.4 per cent in 2023-24.

Health care operating spending will see a 4.4 per cent boost compared to last February’s budget, bringing it to $26.2 billion.

K-12 education will also see a 4.4 per cent increase, bringing operating spending to $9.3 billion.

A ‘sleight of hand shell game’: Notley

NDP Opposition Leader Rachel Notley told reporters Thursday the budget won’t fix staffing shortfalls in the health care system, and K-12 spending is just over one-third of what is required to keep up with enrolment growth over three years.

Notley also accused the UCP government of using a short-term investment in the Heritage Savings Trust Fund, while borrowing cash, to distract from the fact that a promised tax cut won’t be delivered.

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“This is a sleight of hand shell game bait-and-switch of a budget,” said Notley, adding the government’s narrative doesn’t reflect the numbers.

“They’re not being frank with Albertans.”

The province spent almost double its $1.5 billion in a contingency fund for natural disasters or emergencies. Those costs came in at $2.9 billion — including $839 million on wildfire fighting, and $1.8 billion on relief for the agriculture sector.

However, $264 million will be reimbursed through transfers from the federal government.

This year, the government plans to cushion that contingency fund with another $500 million in 2024-25, bringing it to $2 billion.

Dynalife buy-out cost revealed

After the government reversed course on contracting community lab services, Horner said Thursday the buyback cost $32 million, along with $11 million in annual costs.

A Dynalife lab in Edmonton.
A Dynalife lab in Edmonton. Postmedia file

The cost of the UCP’s plan to restructure the health care system, dismantling Alberta Health Services and setting up four new governance organizations, has been estimated at $85 million over two years, including $70 million in 2024-25. However, government officials said Thursday they expect the “efficiencies” created by the restructuring will offset the costs.

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Real gross domestic product (GDP) is expected to grow by 2.9 per cent in 2024-25 after an estimated 2.5 per cent increase in 2023 – although it isn’t keeping pace with population growth.

A personal income tax cut, first promised by the UCP in last year’s provincial election, could start in 2026, with a new rate of nine per cent for those making up to $60,000. That rate could then be lowered to eight per cent in 2027, but that’s only contingent on “sufficient fiscal capacity” in the future.

The government estimates that the new bracket will eventually save some 2.2 million Albertans up to $760 each, costing the province $1.4 billion.

Notley said future projections in the budget do not include allowance for the tax cut in the next three years.

“At every turn, Danielle Smith and the UCP are breaking their promises to Albertans at a time when families need help the most,” said Notley, adding there is a “long list” of fee increases buried in the budget.

Meanwhile, taxes on tobacco products will go up in March, and a new $200 annual fee for electric vehicle registrations will be introduced in January.

Horner pointed to other jurisdictions that have moved forward with similar fees for electric vehicles to collect an estimated $1 million for infrastructure upkeep in 2024-25.

“I’m interested in fixing the roads,” he said.

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