Supporting Albertans

The government is taking immediate action to make life more affordable for Albertans. Alberta’s government is delivering targeted relief for families, seniors and the most vulnerable through the Affordability Action Plan. Assistance is being provided to seniors, families, low income, and vulnerable Albertans through direct affordability payments and the indexation of core benefits programs to inflation.

Alberta’s government is indexing personal income taxes to inflation and fully pausing the collection of the 13-cent provincial fuel tax until June 30, 2023. We are also helping all Albertans with the rising costs of everyday necessities through electricity and heating rebates, and pausing passenger vehicle insurance rate increases.

Budget 2023 makes post-secondary education more affordable by capping tuition at two per cent annually effective 2024-25, reducing interest rates on student loans, and providing more support for former students repaying their loans.

Keeping Albertans and Communities Safe

All Albertans have the right to safety and security in their homes, at school, or at work, whether they live in large cities or on farms, in smaller, rural, or Indigenous communities. The government is taking a fair, firm, and compassionate approach to keeping communities safe while also treating mental health and addiction as health care issues. We are securing Alberta’s future by building safe, resilient communities supported by strong police services, crisis response teams, mental health, addictions and social services, and emergency responders.

Budget 2023 includes increases for the Ministry of Public Safety and Emergency Services for community policing, correctional services, custody operations, victims’ services, and Alberta Sheriffs. The budget also adds more funding to increase capacity and ensure timely access to the justice system for Albertans.

Fiscal Management

Alberta’s government remains committed to fiscal responsibility. In 2019 the MacKinnon Panel identified that Alberta spent more than Canada’s three largest provinces on a per capita basis but did not achieve better outcomes. The government has worked to bring spending in-line with the average of British Columbia, Ontario and Quebec, and Budget 2023 shows that Alberta’s will be at or below the range of the three comparator province average on a per capita basis.

Per Capita Total Expense excluding Debt Servicing Costs: Alberta Versus Big-3 Provincial Average (ON, QB, BC)

Energy and Economic Assumptions

Alberta’s economy is continuing to expand following two years of robust post-pandemic recovery, albeit at a more moderate pace. Real GDP growth is forecast to rise 2.8 per cent and lead the country in 2023. With last year’s strong pace of 4.8 per cent, real GDP fully recovered from the COVID-19 downturn and surpassed the 2014 peak, while incomes in the province hit a record high. This puts the province in a good position to face the challenges coming from last year’s rapid rise in prices, interest rates, and slower global growth.

The oil and gas sector will take the lead in 2023, underpinned by solid energy prices and strong cash flows from last year. With more people choosing to call Alberta home, population growth is projected to rise to its fastest pace since 2006, which should support residential construction activity. However, rising borrowing costs and elevated prices will continue to weigh on consumer spending and non-energy business investment. Inflation will continue to abate this year but will be slow to return to pre-pandemic levels.

Growth is forecast to accelerate over the medium term and become more broad-based as business investment and consumer spending pick up. Alberta’s competitive taxes, regulatory environment and access to abundant and low-cost natural resources will continue to encourage investment in the province. Consumer spending and residential construction activity are also expected to gain traction as inflation subsides further and interest rates come down. Solid fundamentals – such as strong population growth, a relatively young population and lower cost of living – will support Alberta’s continued expansion.

Taxpayer-support debt is

estimated to be lower than what

was estimated in Budget 2022 by

$15 billion in 2022-23 and

$17.3 billion in 2023-24.

The Budget 2023 Capital Plan also increases the Community Facility Enhancement Program to $50 million per year. This important program works in partnership with eligible non-profit organizations to provide funding for sports, recreational, cultural, or other related public-use community facility enhancement needs.

The Capital Plan provides funding for the design and construction of new and modernized schools, as well as planning funds for 14 potential schools across the province. The government continues to invest in charter and collegiate schools to support choice and create clear pathways to post-secondary education and careers.

Budget 2023 invests $2.3 billion to enhance and expand Alberta’s road and bridge network. Key highlights include: $117 million for the twinning of Highway 63 north of Fort McMurray, $51 million to replace the interchange at the Queen Elizabeth II Highway and Highway 566 at Balzac, $75 million for 23 engineering projects all across the province, $60 million for the Vinca Bridge Replacement, and $22 million to address safety concerns at the intersection of Highway 16A and Range Road 20.

Recovery communities offer long term residential addiction treatment and are an important part of the government’s recovery-oriented system of care. Budget 2023 includes $155 million over three years for these important projects. Recovery communities in Red Deer and Lethbridge are expected to open in early 2023. Additional facilities are planned in Gunn, on the Blood Tribe First Nation, in Edmonton and Calgary. Budget 2023 includes funding for three new recovery communities; two in Northern Alberta and one in Central Alberta.

Debt and Debt Servicing

Taxpayer-supported debt outstanding is estimated to total $79.7 billion at the end of 2022-23 and $78.3 billion at the end of 2023-24.

Debt servicing costs are expected to be $2.8 billion in 2023-24. Until the debt is eliminated, resources will continue to be used to pay interest costs rather than being directed to delivering government programs and services that Albertans rely on.

The new fiscal framework sets out rules for using surplus cash to pay down debt as it matures. In 2022-23, $13.4 billion of maturing debt was repaid using surplus cash and $1.4 billion is expected to be repaid in 2023-24.

Fiscal Framework

Alberta Context

The historical volatility of Alberta’s economy and government revenues have long created unique fiscal planning challenges for the province. The tendency to move operational spending well in excess of sustainable levels during years of high commodity prices and robust government revenues is well documented. Now that we have returned to balanced budgets, it is timely and prudent to implement a fiscal framework. We are securing Alberta’s future by implementing fiscal rules to guide decision making and ensure spending growth is sustainable in the long run.

Alberta, along with the rest of the world, has emerged from some difficult years. Resource revenue has hit record levels, accentuated by the Russian invasion of Ukraine, global oil and gas shortages, the unwinding of COVID-19 health restrictions, and uncertainty related to climate concerns. It is timely and prudent to introduce a new fiscal framework. Fiscal rules help secure Alberta’s future by preventing short-term, temporary spikes in resource revenue from leading to permanent increases to spending.

Fiscal responsibility matters and the impacts of fiscal decisions are felt by all Albertans, now and into the future. Taxpayer-supported debt is expected to be $78.3 billion on March 31, 2024 and debt servicing costs are expected to be $2.8 billion in 2023-24 diverting resources away from important programs.

Sustainable Fiscal Planning and Reporting

Alberta’s current Fiscal Planning and Transparency Act includes rules for the budget and fiscal plan, strategic plan, business plans, quarterly fiscal updates, annual report, and Alberta Infrastructure Report.

In Budget 2023, Alberta’s government is introducing a new fiscal framework with four key components:

Amendments will also be introduced for the Alberta Heritage Savings Trust Fund to retain 100 per cent of its net income instead of the current requirement to retain only an amount for inflation proofing. This will result in significant increases to the annual growth in Heritage Fund assets. In 2022-23, $1.8 billion will have been added to the Heritage Fund.

Balanced Budgets

The new fiscal framework will require annual balanced budgets with certain exceptions.

In the consolidated fiscal plan, the budget will only be permitted to be in deficit if:

At year-end, a deficit is only allowed in the consolidated financial statements if:

When a year-end deficit is permitted under the exceptions, the government will have two full years to return to balance. The framework will prohibit deficits for year-end actual results in the audited consolidated financial statements for more than three consecutive years.

For the purposes of the framework, adjusted total revenue and expense excludes changes when government receives dedicated revenue that automatically requires a related increase to expense (dedicated revenue-expense). For example, this would include revenue from the federal government that is required to be spent on a specific initiative or program. It also excludes non-cash, non-recurring expense variations required by accounting standards. These are one-time adjustments required by accounting standards that impact the government’s surplus or deficit but do not require cash. For example, the expense impact of the write-down of the value of an asset would be excluded from the balanced budget requirement.

Year-over-Year Expense Growth

The second component of the framework is to limit year-over-year adjusted operating expense increases to population plus inflation. Adjusted operating expense excludes dedicated revenue-expense items and non-recurring, non-cash expense variations required by accounting standards.

In Budget 2023, operating expense in 2023-24 is limited to the 2022-23 Q3 operating expense forecast adjusted for the previous year’s population growth plus the change in the Alberta Consumer Price Index (CPI) as reported at Q3. For 2024-25 and subsequent fiscal years, the projected operating expense

ceiling in the consolidated fiscal plan must not exceed the prior year’s operating expense ceiling adjusted for population growth plus inflation as set out in the Q3 fiscal outlook for the previous calendar year.

Since November 2020, Alberta’s government has used the fiscal anchor of maintaining per capita expense at or below the range of the average of British Columbia, Ontario and Quebec. This fiscal anchor has served government well and will remain as a guiding policy for government decision-making.

In-Year Expense Growth

The third component of the framework is to limit in-year adjusted operating expense increases to the budgeted and voted contingency except when increases are due to:

In Budget 2023, the budgeted and voted contingency is increased to $1.5 billion per year to allow the government the flexibility to address issues as they arise during the year while upholding the new fiscal framework.

The dedicated revenue-expense table below outlines the main dedicated revenue-expense programs and initiatives for the purposes of calculating the operating expense ceiling and for total expense under the new framework, by excluding revenue received by government entities directly or revenue received for specific programs / initiatives.

The operating expense ceiling limits year-over-year increases to operating expense, adjusted to exclude dedicated revenue-expense, to the prior-calendar-year population growth plus rate of inflation. The 2022-23 forecast for Q3 operating expense is the initial base, after deducting $1.3 billion in non-continuing affordability operating expense measures and $8 billion in dedicated revenue. Population growth plus inflation in 2022 is estimated at 8.7 per cent, resulting in a $50.1 billion 2023-24 operating expense base. The annual ceiling is calculated by adding the current-year (2023-24) forecast for dedicated revenue-operating expense to the base.