Alberta’s local governments are poised for a significant shift with the introduction of the Local Government Fiscal Framework (LGFF) in 2024. The province, responding to persistent calls from over 330 municipalities, aims to provide a more sustainable financial foundation through this initiative.
The LGFF, a result of collaborative efforts between local governments and the provincial administration, unveils a robust allocation formula. This formula delineates the anticipated annual funding for each individual local government, offering them a long-awaited prospect of stable, predictable, and sustainable financial support.
To address municipalities’ concerns about financial predictability, the framework incorporates a revenue index factor. This factor ties future funding levels to the percentage change in provincial revenues from three years prior. This strategic move sets a precedent for a 14% increase in municipal funding for the fiscal year 2025-26, totaling $820 million.
The LGFF is slated to replace the Municipal Sustainability Initiative (MSI) from the fiscal year 2024-25, signifying a deliberate effort to balance predictable funding with fiscal responsibility. Similar to its predecessor, the LGFF grants municipalities autonomy to allocate funds based on their local priorities, covering areas such as roads, public transit, water and wastewater, and recreation infrastructure.
To ensure a smooth transition, top-up funding will be available in the inaugural year of the framework, as outlined in Budget 2023. This provision safeguards local governments from a year-over-year decrease in the 2023 MSI capital funding allocation, providing reassurance for existing infrastructure projects.
Under the 2023 capital plan, Alberta’s government has allocated $3.8 billion to municipalities from 2023-24 through 2025-26. This substantial funding covers the next two budget years and is complemented by federal government contributions for capital projects. The provincial funding, distributed through grants under the MSI and LGFF, has already catalyzed transformative projects, including light rail transit systems in Edmonton and Calgary, as well as critical water and wastewater support.