The budget explains the government's financial plans for the year, and is debated and passed in the legislature.
Alberta's annual budget is based on the April 1 to March 31 fiscal year. The budget includes money that comes in (revenue) and money that goes out (expense).
In addition to the budget, quarterly updates and annual reports are produced to report back to Albertans on the government's accomplishments and fiscal performance.
The government receives revenue from:
- resource revenue such as oil and natural gas royalties
- transfers from the federal government
- income from investments
- revenue from other taxes
- fees on specific products and services
Expense includes all of the programs and services the government provides for Albertans, from supporting people with disabilities to funding school board operations to running a hospital. It also includes staffing costs for people to provide these services.
Balance, surplus and deficit
A budget is balanced if revenue and expense are equal.
If revenue is greater than expense, that's called a surplus. A government can choose to spend more, put the money into savings or pay down debt.
If expense is greater than revenue, this is called a deficit.
When in a deficit position, cutting spending, raising taxes and fees and using savings are all ways for government to cover the difference between expense and revenue.
The government may also choose to borrow money to fund programs or to finance large projects. Deficit financing is a way to get needed infrastructure built faster.
Low interest rates and Alberta's relatively high credit rating means government can borrow money at a reasonable rate of interest, which reduces the cost of borrowing.
Factors that affect budget
Each budget year presents a different challenge for the government, depending on many outside factors including:
- changing economic conditions and volatile resource prices make it difficult to precisely predict the province's total revenue
- public priorities may change every year - research and feedback from Albertans help identify these shifting priorities
Alberta continues to experience strong population growth above the national average. Alberta's population is expected to increase by 1.3% in 2017-18, reaching an estimated 4.3 million people. As Alberta grows, so too does the need for schools, health facilities, roads and programs and services.
Economic forecast meetings and consultations
Economic forecasting is an important part of the budgeting process that helps shape government's fiscal planning and Alberta's economic outlook.
Accurately predicting changes in the economy is a difficult task as global, national and local factors can have a major impact on the provincial economy.
Meetings are held with private sector economic experts to gain valuable insights into recent developments and trends across the country and around the world. Topics include employment trends, energy prices, inflation, global events, Canada's economy and various policy issues.
Albertans are also consulted on what programs and services are important to them.
Preparation and introduction
To prepare the budget, each ministry outlines how much money they need to support the programs and services they provide to Albertans. Proposals and needs are discussed, and the budget is drafted.
The draft budget is introduced to the legislature for debate. Members of the Legislative Assembly vote to pass an Appropriation Bill, which grants the government the authority to carry out its fiscal plan (the budget). To become law, the Bill must be approved by the Assembly and must receive Royal Assent - when the Lieutenant Governor signs it.
Funding for emergencies is over and above what is included in the budget. Funding for these unexpected events are voted on separately in the legislature when needed.
The Financial Administration Act defines how money is allocated and how the government must account for that spending to the legislature and the public. It also:
- establishes the Treasury Board as the ultimate financial management committee with authority over financial information and activity in the province
- determines standing financial management policies and delegations of Treasury Board authority
The Fiscal Planning and Transparency Act reflects the government's desire to present Alberta's finances in a clear format that follows public sector accounting standards and is supported by the Auditor General.
These acts, as well as the Government Organization Act, maintain the financial management framework of the province.
Results-based budgeting review
The results-based budgeting review evaluated the relevance, effectiveness and efficiency of all government programs and services, including those offered by provincial agencies, boards and commissions.
The review was conducted over 3 distinct review cycles from 2012 to 2015. The sixth and final report to Albertans was released in November 2017.