Economist says provincial government likely bringing cuts to services to reach economic targets

Concordia University Economics Professor Moshe Lander discusses Alberta’s 2025 budget with Alberta Primetime host Michael Higgins.

This interview has been edited for clarity and length.

Michael Higgins: Alberta is going from surpluses to projected deficits for the next three years. As the opposition points out, it’s a $10-billion turnaround in one year’s time.

What does that say about Alberta’s financial footing?

Moshe Lander: I think it’s a certain element here of economic mismanagement. There’s nothing wrong with running deficits when times are bad but we haven’t actually hit the bad times yet. Even the foreseeable future, the tariffs aren’t there yet. There’s still the hope that there’s going to be a carve out for the energy industry in Alberta, and we don’t know how long those tariffs are going to last.

If you told me that this was a worst case scenario, OK, but this is the middle scenario. The worst case scenario is even closer to a $9 billion deficit. So I fail to really grasp here, given that the bad times haven’t really hit yet, how they’re justifying running a deficit, and what are they going to do if the bad times are as bad as Canadians are fearing?

MH: How far does this budget go to keeping pace with Alberta’s rapid population growth?

ML: That’s just it, the people moving to Alberta are usually net contributors. People aren’t coming to feast on our social services and things like that. The general move is that because they’re net contributors, that should be holding the budget balance higher than what it otherwise would be in the absence of that rapid increase in population.

If we’re looking at a $5 billion deficit now, what would it have been had we not seen this inflow of people, whether from overseas or from B.C. or Ontario? Again, it’s not on them that this deficit is as large as it is.

MH: When the deficit is pegged at more than $5 billion for this year. What’s to be made of the government going ahead now with the income tax cut that it was actually delaying through times of surplus?

ML: That’s foolish, right? Just because you make a campaign promise, I think people understand you don’t have to keep them. I know that that would give some grist to the mill for the NDP in the next election, to say, ‘Hey, you made this promise’, but nobody’s really expecting that if you’re running a deficit. This is not the time that you cut taxes.

It also shows and highlights that this government, like all of the conservative governments before, continues to rely on non-renewable resource revenue as the source for all of its income. By cutting out income taxes, don’t get me wrong, as an Albertan, I like the idea that taxes are going to go down, but it’s not economically prudent, and especially now if that’s going to add an extra billion dollars to the size of the deficit.

We could go another year without it, or let’s get past the tariffs and see what the world looks like, and then we can figure out how to fulfill this particular promise. They made so many other promises in the campaign in the election, they can go ahead and worry about those right now, and this one can wait.

MH: Where does this budget leave the government’s ability to grow the Heritage Fund, given that the government has a target of at least $250 billion by 2050?

ML: They were off base even before this budget. They’re living in a pipe dream, no pun intended, to think that they’re going to be able to hit those numbers. The level of investment that would be necessary and the returns that would be necessary on those investments are completely unrealistic. At least for the risk that they would have to take to achieve that would be very discomforting for Albertans to realize that our heritage is being based on those return chasing numbers.

I don’t think that they’re going to be able to do it, but again, this is a promise that they’ve made and somehow one that they don’t want to back away from or one that they don’t want to adjust. I’m not sure where they’re going to come up with the money in this budget to meet those requirements, and I think that the oil price that they’re using, because it’s not even the best forecast out there, I think that they’re going to find that they’re going to even fall short on that too.

MH: Minister Horner says there will need to be hard conversations about what the government is expected to fund and the services Albertans want to see. So what should Albertans brace for where spending cuts are concerned?

ML: You’ve got to find $5 billion somewhere, it’s as simple as that. If you’re not going to do it with the introduction of a sales tax, if you’re not going to do it by keeping the income tax rates at least where they were up until yesterday, then yeah, you’re going to have to start cutting and that means that social services are going to get slashed.

I know that this government is committed to the idea of changing the health-care system in Alberta, but it seems to be ensnaring a few people in a little bit of trouble these days. If they’re going to have to run away from that, or at least delay it while they try and figure out what exactly is going on there, there’s not that many social services left where you’re going to be able to find $5 billion worth of saving.

It’s not surprising that when the finance minister was asked yesterday, ‘When do you think that this is going to be fixed?’ His answer was, ‘Nobody knows’. If he doesn’t know, the rest of us certainly can’t.

MH: There has long been debate over the degree of dependence on resource revenue to fund the coffers. How much can the Alberta government rely on the energy sector moving forward, especially considering the impact of tariffs? How that could change future market dynamics?

ML: It’s not just that the tariffs are the issue. It’s also going to be a potential change in the federal government and a change in the way that the oil and gas sector is viewed as well.

There are forces for good or for bad there potentially coming our way in the province, but at the end of the day, it is a non-renewable resource. The very nature of that resource is that once it’s gone, it’s gone, and you can’t get it back. There’s only so many dinosaurs that you can squeeze together to make this resource, and that takes a long time.

So at some point they need to start thinking of how are they going to fund beyond this? If they can’t put money into the Heritage Fund the way they need then they have to look for other sources. The only other sources that are really out there are corporate taxes, personal income taxes or a sales tax, and given that corporate taxes are low, income taxes are falling and a sales tax is a non starter. They really have a problem here as to how they’re going to fund government, regardless of whether they can find the cuts or not to balance a budget in the future.