Alberta’s reform budget in perspective

Much has been made about the recent Alberta Budget, which proposes to reduce provincial government program spending (all spending excluding interest costs) from $54.4 billion in 2018-19 to $53.5 billion by 2022-23, a 1.6 per cent nominal reduction over four years.

Alberta Premier Jason Kenney recently addressed critics of the budget and the associated spending reductions, suggesting the cuts are quite tepid in comparison to reform budgets that have been passed and implemented during previous eras. Former premier Rachel Notley is among those that have criticized the budget for cutting too deeply and adversely affecting the delivery of publicly-provided services.

And it’s certainly true the 2019 provincial budget represents a shift in approach from previous years by proposing to reduce spending to balance the budget over time. Previous governments (both NDP and Progressive Conservative) had increased nominal spending steadily year after year despite the large provincial deficit.

So there has definitely been a change in approach when it comes to government spending and deficit reduction strategy in Edmonton. However, as our colleagues pointed out in a recent study, when considered in a historical context and compared to other reform budgets from the past, the spending reductions in the 2019 budget are comparatively small.

In fact, a review of relatively recent Canadian history (in the 1990s) shows that in past eras, governments of all political stripes have enacted much larger spending reductions in their successful efforts to eliminate large budget deficits.

The table (see bottom of page) contains data for comparative periods of spending reductions since 1990. The chart below ranks the average annual reductions in spending for all provinces over the same period. The data includes periods of fairly major reform (Saskatchewan in the 1990s, for example) and a host of single-year reductions.

In all, 31 periods of spending reduction were noted since 1990 for the provinces. Ranking from highest (1st place) to lowest (31st place), the spending reductions in Alberta’s 2019 budget of 1.6 per cent ranks 26th of the 31 periods noted in data table (3rd column marked “Change”). To put this in perspective, Alberta experienced spending reductions of 20 per cent (over three years) under the Klein reform in the mid-1990s, the largest spending reduction observed in the time period reviewed.

This ranking, however, does not account for the time period the reductions were implemented. A 5 per cent reduction over one year, for instance, represents a more dramatic reduction than the same percentage implemented over a longer time period.

The last column in the data table therefore provides the simple annual average of the spending reduction for each of the 31 periods. The ranking presented in the chart above is based on this data. As you can see from the chart, Alberta’s 0.4 per cent average annual reduction over four years is the smallest of any of the 31 reform periods observed across all the provinces since 1990.

So while the reductions announced in the 2019 Alberta budget are important and set the province on a path towards budget balance, they are comparatively small relative to other periods of spending reductions, including in Alberta.