Alberta faces another fiscal reckoning
By Lethbridge Herald on December 3, 2025.
Lennie Kaplan
Troy Media
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.
© Troy Media
20-19
This assessment is quite correct. But what is not said is that this is a strategy of neoliberals that has been employed these past few decades: on the revenue side, reduce taxes on corporations and the rich, and on the expenditure side, subsidize the privitization of public goods and services. In other words, starve public services by creating unmanageable debt. There hasn’t been a conservative government in a generation that has tried to balance a budget.
Some tax loopholes in Alberta:
“1. No Provincial Sales Tax-a 6% PST would generate approximately $6 billion to $7.2 billion in annual revenue for the province.
2.High Basic Personal Amount-Alberta has the highest provincial BPA in Canada, meaning you can earn a higher amount of income before you start paying provincial income tax.
3.Single or Low Tax Bracket-Historically, Alberta has employed a single or low tax bracket system (e,g,, a new 8% bracket for the first $60,000 of income in 2025), which generally benefits higher-income earners compared to a progressive tax system with multiple high-tax brackets.”
Any bets, in particular, on when, not if, a PST is implemented? And whatever it takes for everyone to pay their fair share?
And what of the $hundreds of millions and $billions in missed revenue and investment in renewable energy?