The Alberta government is projecting a surplus of $5.5 billion for the 2023-24 fiscal year, a significant increase from the previously projected $2.3 billion. This surge in revenue is primarily attributed to soaring bitumen and tax revenue, fueled by the robust energy sector. However, despite the positive economic outlook, the government faces challenges in managing spending priorities and addressing affordability concerns, particularly in the areas of housing and healthcare.
Alberta budget with revised projected surplus
Source: Alberta Finance
Alberta's economic outlook has brightened considerably, with the province now expecting a surplus more than double its previous projection. The mid-year fiscal update, released Thursday, forecasts a surplus of $5.5 billion for the 2023-24 fiscal year, up from the $2.3 billion projected in the February budget. This significant increase is primarily attributed to soaring bitumen and tax revenue.
The revised projected surplus provides the Alberta government with additional financial flexibility to address its spending priorities, such as infrastructure investments, healthcare, and education. It also reduces the province's debt burden, improving its long-term fiscal outlook.
Drivers of the Surplus
Several factors are contributing to Alberta's economic resilience and projected surplus:
Soaring Bitumen Prices: Bitumen, the primary component of Alberta's oilsands, has experienced a remarkable surge in price, reaching over $100 per barrel. This increase has translated into substantial revenue for the provincial government.
Strong Economic Growth: Alberta's economy is projected to grow by 3.8% in 2023, outpacing the national average. This growth is being driven by robust activity in the energy, construction, and transportation sectors.
Increased Personal and Corporate Income Tax Revenue: The province's tax revenue is also expected to increase significantly, driven by higher corporate and personal income taxes.
Balancing the Budget
While the substantial surplus provides the government with financial flexibility, it also faces increased spending pressures:
Wildfire Costs: The province recently experienced its worst wildfire season on record, and the cost of fighting the fires, along with drought recovery efforts and evacuation support, is now pegged at $1.2 billion.
Healthcare Spending: Alberta Health saw the bulk of operating expense increases, adding $301 million to its budget lines, including on doctor pay.
Infrastructure Investments: The government is investing heavily in infrastructure projects, such as roads, bridges, and schools, which will contribute to long-term economic growth.
Despite the economic boom, many Albertans are struggling with rising living costs, particularly in housing. The Opposition NDP has called on the government to do more to address affordability issues, including:
Halting the sale of publicly-owned housing: The government's plan to sell some publicly-owned housing units has raised concerns about the availability of affordable housing.
Providing more support for renters: Renters are facing significant rent increases, and the government could provide more support through measures such as rental subsidies.
Investing in affordable housing projects: The government should increase funding for affordable housing projects to expand the supply of affordable homes.
Trans Mountain Pipeline Expansion
The Trans Mountain pipeline expansion project is expected to bring more capacity to move oil in the second half of 2024. This could lead to a narrowing of the price differential between Alberta crude and WTI, potentially increasing government revenue further.
Alberta's economic outlook is positive, with a projected surplus and strong economic growth. However, the government faces challenges in managing its spending priorities and addressing affordability concerns. Balancing the need for fiscal responsibility with addressing affordability issues will be crucial for the government's long-term success.