This article supplied by Troy Media.

By Lennie Kaplan

Alberta is banking on oil to erase rising deficits, but the province’s budget can’t hold without major fiscal changes

Alberta is heading for a fiscal cliff, and no amount of oil revenue will save it this time.

The province is facing ballooning deficits, rising debt and an addiction to resource revenues that rise and fall with global markets. As Budget 2026 consultations begin, the government is gambling on oil prices to balance the books again. That gamble is failing. Alberta is already staring down multibillion-dollar shortfalls.

I estimate the province will run deficits of $7.7 billion in 2025-26, $8.8 billion in 2026-27 and $7.5 billion in 2027-28. If nothing changes, debt will climb from $85.2 billion to $112.3 billion in just three years. That is an increase of more than $27 billion, and it is entirely avoidable.

These numbers come from my latest fiscal analysis, completed at the end of October. I used conservative assumptions: oil prices at US$62 to US$67 per barrel over the next three years. Expenses are expected to keep growing faster than inflation and population. I also requested Alberta’s five-year internal fiscal projections through access to information but Treasury Board and Finance refused to release them. Those forecasts exist, but Albertans have not been allowed to see them.

Alberta has been running structural deficits for years, even during boom times. That is because it spends more than it brings in, counting on oil royalties to fill the gap. No other province leans this hard on non-renewable resource revenue. It is volatile. It is risky. And it is getting worse.

That is what makes Premier Danielle Smith’s recent Financial Post column so striking. She effectively admitted that any path to a balanced budget depends on doubling Alberta’s oil production by 2035. That is not a plan. It is a fantasy. It relies on global markets, pipeline expansions and long-term forecasts that rarely hold. It puts taxpayers on the hook for a commodity cycle the province does not control.

I have long supported Alberta’s oil and gas industry. But I will call out any government that leans on inflated projections to justify bad fiscal choices.

Just three years ago, Alberta needed oil at US$70 to balance the budget. Now it needs US$74 in 2025-26, US$76.35 in 2026-27 and US$77.50 in 2027-28. That bar keeps rising. A single US$1 drop in the oil price will soon cost Alberta $750 million a year. By the end of the decade, that figure could reach $1 billion. That is not a cushion. It is a cliff edge.

Even if the government had pulled in $13 billion per year in oil revenue over the last four years, it still would have run deficits. The real problem is spending. Since 2021, operating spending, excluding COVID-19 relief, has jumped by $15.5 billion, or 31 per cent. That is nearly eight per cent per year. For comparison, during the last four years under premiers Ed Stelmach and Alison Redford, spending went up 6.9 per cent annually.

This is not a revenue problem. It is a spending problem, papered over with oil booms. Pretending Alberta can keep expanding health care, education and social services on the back of unpredictable oil money is reckless. Do we really want our schools and hospitals held hostage to oil prices and OPEC?

The solution was laid out decades ago. Oil royalties should be saved off the top, not dumped into general revenue. That is what Premier Peter Lougheed understood when he created the Alberta Heritage Savings Trust Fund in 1976. It is what Premier Ralph Klein did when he cut spending and paid down debt in the 1990s. Alberta used to treat oil as a bonus. Now it treats it as a crutch.

With debt climbing and deficits baked in, Alberta is out of time. I have previously laid out detailed solutions. But here is where the government should start.

First, transparency. Albertans deserve a full three-year fiscal update by the end of November. That includes real numbers on revenue, expenses, debt and deficits. The government must also reinstate the legal requirement for a mid-year economic and fiscal report. No more hiding the ball.

Second, a real plan. Not projections based on hope, but a balanced three-year budget that can survive oil prices dropping below forecast. That plan should be part of Budget 2026 consultations.

Third, long-term discipline. Alberta needs a fiscal sustainability framework, backed by a public long-term report released before year-end.

Because if this government will not take responsibility, the next oil shock will.

Lennie Kaplan is a former senior manager in the fiscal and economic policy division of Alberta’s Ministry of Treasury Board and Finance, where, among other duties, he examined best practices in fiscal frameworks, program reviews and savings strategies for non-renewable resource revenues. In 2012, he won a Corporate Values Award in TB&F for his work on Alberta’s fiscal framework review. In 2019, Mr. Kaplan served as executive director to the MacKinnon Panel on Alberta’s finances—a government-appointed panel tasked with reviewing Alberta’s spending and recommending reforms.

From the Fraser Institute

By Tegan Hill

According to this week’s fiscal update, amid falling oil prices, the Alberta government will run a projected $6.4 billion budget deficit in 2025/26—higher than the $5.2 billion deficit projected earlier this year and a massive swing from the $8.3 billion surplus recorded in 2024/25.

Overall, that’s a $14.8 billion deterioration in Alberta’s budgetary balance year over year. Resource revenue, including oil and gas royalties, comprises 44.5 per cent of that decline, falling by a projected $6.6 billion.

Albertans shouldn’t be surprised—the good times never last forever. It’s all part of the boom-and-bust cycle where the Alberta government enjoys budget surpluses when resource revenue is high, but inevitably falls back into deficits when resource revenue declines. Indeed, if resource revenue was at the same level as last year, Alberta’s budget would be balanced.

Instead, the Alberta government will return to a period of debt accumulation with projected net debt (total debt minus financial assets) reaching $42.0 billion this fiscal year. That comes with real costs for Albertans in the form of high debt interest payments ($3.0 billion) and potentially higher taxes in the future. That’s why Albertans need a new path forward. The key? Saving during good times to prepare for the bad.

The Smith government has made some strides in this direction by saving a share of budget surpluses, recorded over the last few years, in the Heritage Fund (Alberta’s long-term savings fund). But long-term savings is different than a designated rainy-day account to deal with short-term volatility.

Here’s how it’d work. The provincial government should determine a stable amount of resource revenue to be included in the budget annually. Any resource revenue above that amount would be automatically deposited in the rainy-day account to be withdrawn to support the budget (i.e. maintain that stable amount) in years when resource revenue falls below that set amount.

It wouldn’t be Alberta’s first rainy-day account. Back in 2003, the province established the Alberta Sustainability Fund (ASF), which was intended to operate this way. Unfortunately, it was based in statutory law, which meant the Alberta government could unilaterally change the rules governing the fund. Consequently, by 2007 nearly all resource revenue was used for annual spending. The rainy-day account was eventually drained and eliminated entirely in 2013. This time, the government should make the fund’s rules constitutional, which would make them much more difficult to change or ignore in the future.

According to this week’s fiscal update, the Alberta government’s resource revenue rollercoaster has turned from boom to bust. A rainy-day account would improve predictability and stability in the future by mitigating the impact of volatile resource revenue on the budget.

Tegan Hill

Director, Alberta Policy, Fraser Institute