In a tale of two provincial budgets, one province governed from the right and one from the left, the story is not about differences but instead a long list of similarities.
Alberta and British Columbia tabled their fiscal 2023-24 budgets on Tuesday afternoon. Each document certainly displays predictable ideological hallmarks – the B.C. NDP have a suite of measures for lower- and middle-income people and Alberta’s United Conservative Party pledged balanced budgets forevermore.
Yet what’s most striking is all that the two share in common, from their fiscal bounties to the risks they each court.
People in both provinces generally pay lower taxes than the rest of the country, at the same time their provinces carry lighter debt loads. A strong economy has propelled revenue in Alberta and B.C. in recent years, providing ample money to spend. And spend they do. Alberta and B.C. are led by rookie premiers, on the job since last fall. Danielle Smith in Alberta faces an election this spring; David Eby in B.C. goes to the polls by fall 2024. Whether the UCP on the right or the NDP on the left, new spending is generous – elections beckon – but not completely unbridled.
Revenue: First, a broader perspective. In the NDP’s first year in power, 2017-18, revenue was $52-billion. The 2023-24 budget forecasts $77.7-billion – 50 per cent more than six years ago. More immediately, however, revenue is down from $82.7-billion in the fiscal year coming to a close, 2022-23, as an inflation-generated bump in revenue fades. Corporate tax income, for one, is down by $4.6-billion, more than 40 per cent. But the pile of cash coming into the B.C. treasury remains far larger than it recently was. Alberta’s experience is the same. For 2023-24, it’s predicted to be $70.7-billion, a decrease from an estimated $76-billion in 2022-23, as the oil and natural gas windfall comes off a dizzying record peak. Like B.C., forecast revenue is still 65 per cent higher than the $46.2-billion of 2019-20, the UCP’s first year in office. These are two rich provinces, with lots of leeway to operate.
Spending: Up and away. Alberta plans to spend $68.3-billion in 2023-24, up from an initial projection of $62.1-billion for 2022-23. The province predicts a small 2023-24 surplus of $2.4-billion but Ms. Smith – who when outside government regularly criticized Alberta’s “spending addiction” – has ended the austerity era of Jason Kenney. Ms. Smith hiked spending on health care, education and social services by 11 per cent. In B.C., 2023-24 spending is forecast at $81.9-billion, up from last year’s initial budget of $74-billion. Health care is a primary focus, alongside areas such as housing and the continuing drugs overdose crisis. B.C. plans a $4.2-billion deficit, about 1 per cent of GDP. B.C. optimistically forecasts small deficits – but no balanced budgets – through 2025-26. This marks a shift: Since 2017, the NDP delivered four surpluses in six years, including a $3.6-billion surplus in 2022-23.
Debt: Alberta, using its biggest-ever bounty of oil money, cut debt deeply. The province paid off $13.4-billion since last spring, slashing an already low debt-to-GDP ratio of 15 per cent to 10 per cent. Meanwhile, the Heritage Savings Trust Fund is worth less today, adjusted for inflation, than it was in 1980. In B.C., with small deficits and capital spending, the province’s debt-to-GDP ratio will climb to 23 per cent by 2025 from the current 16 per cent. That’s still low – but the trajectory shows only increases.
Risks: B.C. last year agreed to increase pay for 500,000 public-sector workers, from health care and education to the civil service. That means new costs of roughly $5-billion every year ahead. If the economy skids into recession, a small deficit morphs into a bigger one and a comfortable debt-to-GDP ratio gets stretched. Alberta’s problem is more specific. A US$10 swing in the price of a barrel of oil means a whiplash of $6.3-billion, up or down. Surpluses can almost instantly become deficits, as the province knows all too well, through its long boom-bust-boom history. Alberta, as it does every year, boasted in its budget of being the sole province without a provincial sales tax. According to Alberta’s tally, that’s at least $8-billion in forgone annual revenue – what could be a useful fiscal foundation when oil is not gushing wealth.
The bottom lines: Alberta and B.C. are in an enviable position. Low taxes, low debt, historically high revenue and ample spending. Both provinces tabled reasonably prudent budgets. And both face the same risk, that today’s positive outlook suddenly shifts into something a lot more challenging tomorrow.