Alberta received more funds from feds than from revenue for first time in decades

CALGARY -

The year 2020 marked the first time since the 1960s that Alberta received more money from Ottawa in federal funding than was raised in revenue, according to the latest data from Statistics Canada.

Federal spending in Alberta was up by $30 billion last year, effectively doubling what is normally doled out. The province was also the largest recipient of the COVID-19-related federal spending increase per capita in 2020 by a wide margin with about $6,500 given out to each person.

University of Calgary economist Trevor Tombe says Alberta is still very much a 'have' province despite the 2015 recession and drop in oil prices, but adds that it's very valuable for the province to remain within Canada’s federation and part of its equalization program. 

"We can pool our risks and some of the debt that's associated with the income supports being carried by Ottawa, instead of by provincial governments and it’s actually cheaper," Tombe said.

"It's not that Alberta pays more in federal revenue than other provinces, it pays more because it's home to many high income individuals. Some do find it unfair that high income individuals pay more tax than lower income individuals, but that's redistribution across individuals rather than across regions."

To be clear, this recent COVID-19-related support for Alberta is one-time funding from Ottawa and has nothing to do with equalization payments in light of a recent provincial referendum on the issue held during October’s municipal elections. 

Tombe notes that much of the increased federal spending largely reflects the pandemic and he doesn’t expect this trend to continue.

"2021 is going to be a pretty strong rebound year for the province in part because of high oil prices along with just a natural recovery from COVID, so I don't anticipate what we saw in 2020 to continue because it was really something that was a blip away from the normal patterns."

"WE WILL PAY MORE IN DEBT": FAIRNESS ALBERTA

Dr. Bill Bewick, executive director of Fairness Alberta, disagrees with Trevor Tombe’s position that Alberta is stronger within the Confederation of Canada as it continues to shell out upward of $20 billion annually in equalization payments.

Bewick says every province was a net recipient of hundreds of billions of dollars from Ottawa in 2020 because of the pandemic and Albertans will bear the brunt of paying the most of it back. 

"It's the federal government racking up a massive debt that we will all pay and Albertans pay even more than most other provinces," Bewick said.

"Assuming the Alberta government would have made the same decisions on its own, it would just be a matter of provincial debt versus federal debt. As I said, Albertans pay a bigger share of the federal debt than we ever get back and so I don't see how it would be any worse off."

Bewick says it speaks volumes how massive the pandemic was and that an enormous amount of federal government spending was needed just to have Albertans receive more funding from Ottawa for the first time in decades.

"It doesn't really say anything about federal fiscal flows and I'm sure this year, in 2021, we'll be right back to Albertans net contributing a massive amount beyond any other province just as we were last year and the year before that."

Tombe, on the other hand, says government debt does not come due in the normal sense that is required for payments over pre-specified time periods such as a mortgage on a home or a car loan.

He says governments can sustain and service debt 'basically indefinitely' if economic growth is sufficiently strong.

"It doesn't look like that's the case federally so over the next 25 years, that GDP ratio federally will come back down to pre COVID levels without any kind of new special levy or reduction in federal spending. So that's important to keep in mind," Tombe said.

"But if a government were to want to bring those debt levels down more quickly then economic growth would deliver, then, yes, that would probably involve tax increases and that means high income individuals would end up paying more and that's a critical distinction."