Alberta Budget Should Re-Establish Sustainability Fund to End Boom-and-Bust Cycle

The Alberta government is set to table its budget for the 2026/27 fiscal year on February 26, and Premier Smith has warned of 'significant' deficits amid low oil prices. This boom-and-bust cycle has plagued the province for decades, with surpluses turning into deficits when resource prices fall.

According to Tegan Hill, director of Alberta policy at the Fraser Institute, the government should re-establish the Alberta Sustainability Fund, which would provide a stable predictable level of resource revenue for the budget. This fund was originally introduced in 2003 but fell apart by 2007 and was eventually eliminated in 2013.

The Smith government's projected $6.5-billion deficit for fiscal year 2025/26 is a stark contrast to the $11.5-billion surplus posted in 2022/23 when oil prices averaged nearly US$90 per barrel. Unless the government tries a new approach, Albertans should prepare for another 'bust' period of debt accumulation.

Hill notes that relying on volatile and unpredictable resource revenue to support the budget is unsustainable, and Premier Smith recognizes this problem, stating that Alberta has become unsustainably dependent on non-renewable resource revenues. By introducing a rainy-day account, the government can mitigate short-term volatility and prevent future deficits and debt accumulation.