Alberta’s 2024-25 second-quarter fiscal update, delivered by President of the Treasury Board and Minister of Finance Nate Horner, highlights a blend of economic resilience and looming challenges. The province remains on track for a surplus this fiscal year, although declining oil prices and rising public sector costs present significant hurdles.
Economic Highlights
Alberta projects a $4.6 billion surplus for the 2024-25 fiscal year, an increase of $4.2 billion from the initial budget estimate. Total revenue is forecasted at $77.9 billion, driven by stronger-than-expected personal income tax revenue and increased non-renewable resource royalties.
However, Minister Horner emphasized the fiscal risks posed by dropping oil prices. “Each $1 drop in the price of West Texas Intermediate oil translates to a $630 million reduction in revenue,” Horner said. The government’s forecast averages oil prices at $74 per barrel, down $2.50 from the first quarter.
Investments in Public Services
Amid a growing and aging population, Alberta is allocating significant resources to essential public services. Spending on health care, mental health, education, and social services will increase. An additional $847 million is earmarked for disaster and emergency response, supporting communities recovering from wildfires and other natural disasters.
Efforts to stabilize physician compensation and expand health care access are underway. “We aim to ensure Albertans have access to family doctors and quality care,” Horner stated, noting the strain on the system due to rapid population growth.
Education funding has been bolstered to address surging enrollment. The government also reaffirmed commitments to building new schools and upgrading infrastructure to meet the needs of Alberta’s expanding communities.
Challenges Ahead
Despite fiscal prudence, Horner acknowledged the volatility in Alberta’s resource-dependent economy. The update notes that the province’s taxpayer-supported debt is expected to reach $84 billion by March 2025, with servicing costs of $3.2 billion annually.
Public sector negotiations involving over 200,000 workers could also strain the budget. “We must balance contractual obligations with fiscal sustainability,” Horner explained.
Unemployment, forecasted to rise to 7.2% this fiscal year and 7.4% in 2025, reflects a mismatch between population growth and job availability. “While employment growth is strong, population increases outpace job creation,” Horner noted, identifying newcomers and younger workers as the most affected groups.
Future Outlook
Looking ahead, the government remains cautiously optimistic. Alberta’s fiscal framework mandates balanced budgets and prudent use of surplus funds. Half of the projected $2.9 billion in surplus cash will be allocated to debt repayment, with the remainder directed towards the Alberta Heritage Savings Trust Fund or one-time initiatives.
“Saving in the Heritage Fund ensures that Alberta’s wealth benefits future generations,” Horner said, adding that the fund has grown to $24.3 billion, its highest value since inception.
The government is also preparing for Budget 2025, with an emphasis on adaptability to potential revenue declines. Horner reiterated Alberta’s commitment to maintaining the lowest corporate tax rate in Canada, fostering investment and diversification to reduce reliance on oil and gas revenues.
With resource revenue fluctuations and increased expenditures on public services, the government faces a delicate balancing act to secure Alberta’s financial future.