Premier Smith praises Budget 2023 for focus on debt repayment, balanced budgets and 'saving for the future'

THE CANADIAN PRESS/Spencer Colby

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Alberta Premier Danielle Smith addressed the province's recently unveiled budget for the upcoming fiscal year in front of a crowd of dozens of business owners and policy wonks in Calgary on Thursday.

"As premier, I am committed to balancing free enterprise, freedom, and government work. It has been my goal since day one to make Alberta a better place to live — to attract investment and create prosperity for all," said Smith in her opening remarks.

"As a free enterprise conservative, the government's role is to create a positive and supportive environment for economic growth so that you can do what you do best."

Smith pivoted to discussions on Budget 2023 that she said "will secure Alberta's future."

She praised her finance minister, Travis Toews, for tabling a fiscal framework that enabled the UCP to invest heavily in critical services after years of "putting the books in order."

The UCP outlined on Tuesday a plan to limit annual spending increases to below population growth and inflation while creating requirements for running a deficit and dictating how to set aside surplus cash.

Government legislation for the spring will request 50% of a surplus go to repaying debt maturing that year, with the remainder going to a new $1.4 billion "Alberta Fund." The "Alberta Fund" is cash left at the end of the year that is listed in previous years as general revenue.

Alberta could either pay its debt or allocate more money for the Heritage Savings Trust Fund with the extra cash. It could also go towards "one-time initiatives," like affordability payments or capital projects.

"We want to make sure that as we enter a period of ongoing surpluses, we are managing them in a conservative, stable and prudent way," added Smith.

The premier hinted at details concerning balanced budget legislation, stating the government must balance the budget within two years of running a deficit.   

Smith also said the year-over-year inflation rate for Alberta (6.2%) exceeded operational spending increases (4.0%) — a measure she claimed is why restricting spending increases to population growth and inflation is essential.

On Tuesday, the UCP announced $66.8 billion in new spending, with $1.5 billion allocated for Alberta's disaster contingency fund. Smith said the contingency fund allows the government to "spend upfront when emergencies arise without [having to table] supplementary budget estimates."

Among the notable spending increases include $965 million more in healthcare for $24.5 billion to decrease surgical and emergency room wait times and improve ambulance response times.

They also increased spending for public safety initiatives by $1.2 billion, increased social sector wages by $102 million, implemented a 2% cap on tuition increases and invested billions in businesses and critical infrastructure, among dozens of other initiatives.

The premier then touted her government's "surplus allocation strategy" to ensure 50% goes to debt repayment for that fiscal year.

While the forecasted surplus for 2022/23 fell from $12.3 billion to $10.4 billion — owing to declining royalty revenues, lost revenue from the tax holiday, and inflation relief — Budget 2023 projects Alberta's taxpayer-supported debt will fall to $78.3 billion by the end of 2023/24 — $17.3 billion lower than estimated last fiscal year.

Toews is projected to pay down $13.4 billion this year, the largest debt repayment in the province's history. The government also committed to allocate another $10.8 billion over the next three years towards savings and debt reduction.  

The Canadian Taxpayers Federation (CTF) applauded the UCP for prioritizing debt repayment, balanced budgets and saving for the future in Budget 2023 as hallmarks of its fiscal framework.

"You can't provide for your family if you're counting on winning the lottery yearly," said Kris Sims, Alberta Director for the CTF. "Committing to balanced budgets, debt repayment and saving for a rainy day shows this government is serious about not repeating the mistakes of the past."

"In 1999, premier Ralph Klein committed to putting 75% of the province's surplus down on the debt. That rule kept his government from blowing the surplus each year and remaining committed to making Alberta debt free," said Sims. "Following Klein's lead strongly shows that this government is also committed to debt repayment."

For decades, the taxpayers federation has urged the province to create budget guardrails to ensure fiscal prudence in future spending.

The investment agency Moody's upgraded Alberta's credit rating from AA3 to AA2 — its second credit upgrade of 2023. According to the CTF, credit upgrades are necessary because they influence the government's spending on debt interest charges. 

"The better the credit score, the less money interest charges are likely to cost."

The budget holds the province's net debt-to-GDP ratio, which Toews has pledged to keep under 30% at 10.2% in 2023/24. That's up from the 9.9% projected in the fall.

"The interest on the government credit card will cost Albertans about $2.6 billion this year. That's about $565 per Albertan," said Sims, adding that the province can't use the money to hire more nurses or lower taxes because it's going to the bond fund managers on Bay Street.

Debt servicing costs are expected to hit $2.8 billion in 2023/24.

Sims referenced surging resource prices for helping increase government revenues but said the credit upgrade isn't all due to an "act of God." 

"The government is making good decisions. Moody's gave the Alberta government a good report for three main reasons: low taxes, debt repayment and saving for the future."

"Its [Alberta's] tax regime remains highly competitive relative to most provincial peers given a lack of sales tax and favourable corporate and personal income tax rates," said the investment agency.