CALGARY – A new study suggests Alberta’s debt could exceed $36 billion by the end of the decade if the government doesn’t rein in spending.
The findings come from the Fraser Institute’s How Much, How Fast?: Estimating Debt Accumulation in Alberta through 2019/20 study, released on Thursday.
“While falling oil prices have hurt Alberta revenues, uncontrolled spending increases over the past decade have significantly weakened the province’s financial position,” study co-author Steve Lafleur said in a news release.
According to the right-leaning think-tank, previous Alberta governments spent as though the economic boom would never end and the current government has “continued the trend towards higher program spending.”
Consequently, for the first time in 17 years, Alberta’s debt is expected to exceed its financial assets.
“This is a dramatic change from 2007/08 when Alberta had no net debt and was sitting on $35 billion in financial assets,” the Fraser Institute said.
“Given economic conditions in the province, if the government fails to restrain spending, the pace of debt accumulation in Alberta may be extremely rapid,” study co-author Ben Eisen added.
How much debt will Alberta accumulate in the next few years?
According to the government’s spending and revenue forecast, Alberta’s debt will reach $19.8 billion by 2019/20. However, the Fraser Institute believes that forecast downplays many “significant risks” that could cause debt accumulation to increase.
The study looked at three possible scenarios, including if the government were to increase spending at the same rate as the projected GDP growth (4.7 per cent annually.)
In that scenario, Alberta’s debt would balloon to $36.1 billion by 2019/20, roughly $8,000 of debt per Albertan.
If that scenario were to pan out, Albertans could potentially see a $71-billion swing – from $35 billion in assets in 2007/08 to more than $36 billion in debt in 2019/20.
“With the provincial budget only two weeks away, the government’s spending choices will play an important role in determining how much debt is laid on the backs of working Albertans and their families,” Eisen said.
– With files from Bindu Suri