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Well, at least we now know why Alberta Premier Danielle Smith kicked her promise to give Albertans a tax cut way down the road.

The province’s 2024-25 budget, released Thursday, revealed a financial picture far tighter than anyone would have predicted. Far from the surplus of more than $5-billion in the current fiscal year, the $367-million surplus forecast for the coming year, beginning April 1, allows just a sliver of wiggle room.

In contrast to the more freewheeling pre-election budget from the Smith government one year ago, this restrained document – in both tone and substance – is designed to keep expectations low.

Even the smaller surplus number comes with an asterisk. The province is borrowing $2.4-billion for capital projects. Total Alberta debt, which the United Conservative Party government and high crude prices had whittled down in recent years, will now increase slightly.

Alberta is far from doing poorly. Annual provincial revenues are now firmly in the $70-billion-plus range. So what happened this year?

Danielle Smith’s friendships come back to haunt her

Ms. Smith and Finance Minister Nate Horner cite a softer oil price as the reason for a more restrained budget. For every $1 change in the price of oil, Alberta’s financial fortunes swing up or down by about $630-million. This year, the government is estimating that West Texas Intermediate will average US$74 per barrel – significantly less than last year, and on the low end of available forecasts for 2024.

The government is also paying off some debt and saving a bit, putting some of the surplus funds from the current fiscal year into the Heritage Savings Trust Fund. It is also keeping earnings from the fund, in the fund itself – a departure from decades past.

Those moves are expected to contribute to building up the Heritage Fund to a solid $25-billion 12 months from now. It’s a very early step in a new promise from Ms. Smith – still completely undefined – for a long-term fiscal plan to grow the province’s main long-term savings account to as much as $400-billion by 2050.

The province’s fuel tax is back on, at a reduced rate, probably bringing in more than $1-billion in revenues. The decision to halt a promised personal tax cut until 2026 at the earliest – a clear break from the inflation-fighting pledge of the UCP in last May’s election – can be viewed as some sort of income protection, by the standards of a government allergic to looking at other revenue streams.

Spending has been kept at a relatively tight 3.9 per cent – a bit higher for health and education – a growth rate meant, in part, to temper expectations before labour negotiations involving tens of thousands of workers coming this year. It’s also well below what is needed to keep up with inflation and the fastest population-growth rate in the country, say the Alberta NDP and other critics.

There are certainly dark clouds on some horizons. For the province’s capital, a long-needed, long-promised south Edmonton hospital appears permanently iced, with the government citing costs that could have reached $5-billion. A contingency fund of $2-billion this year might not be enough to cover disasters such as wildfire and drought in what is already a hot, dry year. “We know we’re starting out in a rough spot,” Mr. Horner told reporters Thursday.

With Alberta renewables ban, business common sense goes out the window

Ms. Smith has said she will not raise income taxes or create a provincial sales tax, but she’s more than happy to join U.S. red states and Saskatchewan in a $200 annual tax on electric vehicles. Her government says it’s about extra road wear-and-tear from the sometimes heavier vehicles, and also because EVs don’t contribute to fuel taxes. But to many, it will look like yet another slapdown to the green movement.

However, while economies around the world are stressed from inflation and high interest rates, oil-focused Alberta is doing a little better than most. The budget documents note the province accounted for 22 per cent of all Canadian jobs created in 2023, despite having just 12 per cent of the country’s population. Housing starts for single-family homes have jumped, “most notably in Calgary, where they were up more than 40 per cent year-over-year in the fourth quarter of 2023,” the budget states.

Alberta is expected to continue attracting newcomers at a pace not seen since the 1980s. The province’s population is expected to grow at a rate of 3.7 per cent in 2024, just slightly lower than last year’s extraordinary 4.1 per cent.

That may be one of the most striking aspects of Alberta today: For all the criticism of Ms. Smith and the UCP, or their budget, it seems to have had zero effect on the thousands of people moving to Alberta for a decent shot at that now-elusive combination of work and affordable housing.

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