Alberta Budget Analysis 2024
After the Gold Rush
Alberta’s budget lays out plans for restrained spending and cash savings
As a document, budgets describe Government of Alberta programs, policies, and spending via graphs, financial statements, and brown cardboard prose over hundreds of pages. For the uninitiated, it can be dry stuff, bordering on the incomprehensible. It only comes to life when placed in a political context. Politics is often derided, but politics is the life force of democracy, the natural way for self governing people to ensure their views and values find expression.
It’s important to remember that apart perhaps from the page numbers, everything in the Budget was birthed in politics. Every dollar allocated, every program, every policy, and every word in the Budget has its origins in decisions made by politicians, whether last week, or decades ago, all of whom were influenced by their constituents, their political opponents, the media, and the advocates who fought to advance their own interests or those of their sector or organization.
Budget 2024 trails those ghosts behind, but is also part of a current political narrative, first espoused by Premier Smith before she was premier. The Premier’s politics are constantly being updated and refined, but certain themes endure. Budget 2024 advocates fiscal prudence, low taxes, harnessing the private sector to drive innovation in the delivery of public services, and skepticism of all federal policy, especially that which overlaps provincial jurisdiction. Examples of the latter include proposals to gain more provincial influence in the delivery of policing, the enforcement of firearms legislation, delivery of public pensions, the delivery of healthcare, initiatives to set climate change targets and to determine energy policy, especially as it relates to renewable electricity, and ensuring adequate baseload power from natural gas and potentially from small modular reactors.
Most recently, the government has signalled that it will not participate in the federal pharmacare program, opting instead to ask Ottawa for Alberta’s share of the federal dollars to beef up its own provincial system. Perhaps most interesting of all in this Budget is the Premier’s commitment to convert the Heritage Savings Trust Fund, to a sovereign wealth fund, which would be used to help Alberta transition away from our reliance on revenue from oil and gas. That debate and all the politics that surrounds it has barely started.
Other factors influence how this narrative is received. So much in Alberta is determined by the price of oil, the tail that wags the Alberta dog. Oil, bitumen, and natural gas royalties are major sources of government revenues and low prices imperil the ability of the government to deliver on its promises. Also not to be overlooked is the rise and maturation of the Alberta NDP, now in a leadership race, and bound to be vocal and effective critics of the government’s plans. Finally, mother nature is also determined to be heard. Alberta is in the grip of the most serious drought in decades, and political fortunes will be impacted by whether we receive adequate rain and snow, a humbling realization for a class of decision makers who, it might be argued, could occasionally use humbling.
Below is our analysis of key items and themes within the Budget 2024.
The tenuous politics of spending restraint in a growing province
Finance Minister Nate Horner took several opportunities in his budget address Thursday to underscore the consecutive budget surpluses posted by the province under UCP stewardship. While the province expects to post a surplus of $367 million in the 2024-25 fiscal year, the province faces strong headwinds. Both the health ($1.1 billion) and education ($393 million) ministries will receive hundreds of millions of new dollars, but population growth coupled with inflationary pressures and restructuring of the health system will mean that those dollars will not go as far as they would have in the past.
This is a restrained budget in line with Premier Smith’s recent televised address: growing budgets, increased investment in the Heritage Fund, but few shiny baubles or splashy new programming announcements. Some Albertans will be disappointed with the lack of supports to keep up with the cost of living, including the postponing of a promised personal income tax cut. Those who are tired of an over reliance on resource revenues will appreciate that part of the surplus will be saved in the Heritage Fund.
Building Alberta
The Government’s three-year Capital Plan will grow to approximately $25 billion, an increase of $2 billion over last year. The biggest expenditure is $810 million for the previously announced redevelopment and expansion of the Red Deer Regional Hospital. $26 million will go to a rural medical teaching school, housed at the University of Lethbridge. This aligns with government plans to update healthcare facilities and improve care in small towns and rural communities.
Also of note, the Local Government Fiscal Framework will replace the Municipal Sustainability Initiative, while increasing funding for communities by over $700 million over three years. Alberta will also invest $125 million in new funds to modernize seniors’ lodges in the province. Increased spending will also go to the province’s continuing care facility assets. Further funding will go to water management infrastructure and economic development in the Industrial Heartland.
Edmonton (post-secondaries and health facilities) and Calgary (the new arena and a smaller-than-requested contribution to the Blue Line) have not been forgotten, but this year’s Capital Plan seems proportionally aimed at the needs of Albertans living outside of the province’s two major cities. Smaller centres have wrestled with a shortage of physicians, aging municipal infrastructure and seniors needing to leave their home communities to receive care. Those challenges are addressed in this Capital Plan, a visible win for UCP MLAs outside of Edmonton and Calgary, but it comes at a cost. It is no coincidence that the construction of the new South Edmonton Hospital has been put on hold indefinitely.
Everyone needs a school
Alberta’s education system will receive an additional $393 million – a bump of 4.4 per cent, year-over-year. Public and separate school divisions will see increases (including funding to support booming student populations), but a significant portion of new funds will be allocated to supporting private school development, ($24 million in new funds over three years). Additional funds will also go to charter schools. Teachers, school divisions, unions and others will loudly argue that those funds be invested directly into the existing public and separate systems.
Funding for new schools is a question mark. As always, the needs exceed the demands. Expect further announcements to find out who gets a school and who has to wait.
Alberta’s decarbonization efforts
Budget 2024 expects Alberta’s industrial carbon pricing system to raise $539 million dollars. The Budget commits a quarter of every dollar over $100 million to the Alberta Carbon Capture Incentive Program. It will cover 12 per cent of capital costs for new CCUS plants. The Budget is critical of Ottawa for delays in rolling out their own program to incent investment and to ensure Alberta can achieve carbon neutrality by 2050. Alberta’s go-it-alone commitment to CCUS will be used as evidence that Ottawa is not acting in good faith despite their claims to the contrary.
An arts and culture renaissance in Alberta
For the first time in decades, the Government of Alberta has committed to restore funding to the Alberta Foundation for the Arts, promising $30 million over the next three years. The government will also allocate $17 million over three years for the transformation of Arts Commons and Calgary's Olympic Plaza, a cause championed by Arts Commons for over a decade. Edmonton's Winspear secures $9 million for its capital campaign, while Glenbow's revitalization, backed by a $40 million Budget 2020 commitment, maintains its position as a core piece of the province's capital plan. Surprisingly, Budget 2024 positions the UCP-led Government as perhaps the most arts-friendly government in years.
Disaster season: The climate strikes back
Alberta is experiencing its worst drought in decades, and with little snow in most of the province this winter, anxieties are high this year over having sufficient water for irrigation, industry, and communities. The Government has responded with $500 million more in disaster contingency. Another $125 million over five years has been set aside for drought mitigation. $19 million has been allocated for a Water Availability Strategy.
Large-scale agricultural disaster still represents a significant threat to the province’s surplus – especially with a crop insurance fund depleted over the last three years, rising costs for reinsurance, and the possibility of ad hoc disaster assistance.
Seeking dollars, cents
With the government’s modest increases to spending, corresponding new revenue sources shouldn’t be surprising. Budget 2024 changes the fee to register real estate on the Land Titles system: property transfers (charged $2 for every $5,000 of value) or new mortgages (charged $1.50 for every $5,000 of value) are now set to harmonize at $5 per $5,000 of value, adding hundreds of new fees to real estate transactions in Alberta. The environmentally conscious also get nickel-and-dimed. They’ll pay a new annual EV tax of $200. The more traditional sin taxes also increase, with smokers and vapers bearing the brunt of this year’s changes.
The reaction
Edmonton Mayor Amarjeet Sohi seemed to take a wait-and-see approach Thursday evening, noting his pleasure with the investments made in the city’s post-secondary institutions and public safety, while reserving judgment about the permanence of the province’s decision to indefinitely delay the South Edmonton Hospital. The city’s Chamber of Commerce expressed optimism toward the budget, saying that the document was “on the right track” and citing investments in labour attraction, the city’s post-secondaries, and public safety.
Meanwhile, Calgary Mayor Jyoti Gondek led with concerns about the City shouldering the burden on areas of provincial jurisdiction – including addressing the housing crisis – while saying that “we’re grateful for what has been promised to us, but it’s simply not good enough for the hardworking Calgarians who deserve more.” Calgary’s Chamber of Commerce said it was “pleased” by the budget’s focus on fiscal responsibility, while praising the province’s moves on economic diversification, talent attraction, and safeguarding key industries like agriculture and energy. However, the Chamber expressed disappointment in a lack of specific supports for small business while urging more action on housing affordability.
Initial reaction to Budget 2024 from the opposition NDP has focused on what they characterize as “broken promises” made during the last election, increased fees for buying and selling homes, and not increasing funding for services in line with inflation and population growth.
Beware the ides of March
Budget 2024 is fiscally prudent but even the most careful budgets are subject to shocks beyond the control of legislators. As always, Alberta revenues depend on strong oil prices, which cannot be guaranteed. The wildfire season, drought, and world affairs can all impact revenues and expenses. Labour negotiations are a major question mark in 2024, and every year comes with an element of uncertainty. 2024 is no exception. The New West team is standing by to help clients find their way as 2024 unfolds.