Alberta Budget 2026: The Boom-and-Bust Cycle Returns

CALGARY, AB — The warning landed hard on February 18: Premier Danielle Smith told Albertans to "brace themselves" for deficits in the upcoming provincial budget. The culprit? Oil prices hovering below $60 a barrel for most of the past year, exposing Alberta's stubborn dependence on resource revenue despite years of diversification talk.

The numbers tell the familiar story. The Alberta Budget 2025-26, tabled last February, projected a $5.2 billion deficit. More red ink is forecast for 2026-27 ($2.4 billion) and 2027-28 ($2.0 billion). Lower non-renewable resource revenues collide with increased spending in health and education. The boom-and-bust rollercoaster Alberta thought it had left behind is back for another ride.

The Heritage Fund Strategy

Smith's government is betting big on the Alberta Heritage Savings Trust Fund (AHSTF), aiming to balloon it from $31.5 billion (as of September 30, 2025) to $250 billion by 2050. The plan: generate enough investment returns to cushion future oil price shocks. Last summer, Treasury Board approved an additional $2.8 billion contribution using 2024-25 surplus cash. The fund posted a 6.2% return in the first half of fiscal 2025-26.

But here's the tension: you can't grow a long-term nest egg and plug short-term holes at the same time. Every dollar diverted to cover today's deficit is a dollar not compounding for 2050.

The Forgotten Tool

There's another mechanism gathering dust. The Alberta Sustainability Fund, established in 2003 following the Financial Management Commission's recommendations, was designed explicitly for this moment: provide funding during deficits, replenish during surpluses. It invests primarily in Canadian fixed income securities—steady, boring, reliable.

Yet policymakers in Calgary and Edmonton rarely mention it in budget discussions. The Sustainability Fund lacks the political sex appeal of the Heritage Fund's quarter-trillion-dollar ambition, but it was purpose-built to smooth out exactly the volatility Alberta is experiencing now.

Diversification, On Paper

The government's Alberta Job Growth and Diversification Strategy targets film and television, agriculture processing, renewable energy, and hydrogen production. On February 12, the province announced $28 million through the Technology, Innovation and Emissions Reduction (TIER) fund—sourced from carbon pricing on large emitters—to advance clean tech projects.

The investments are real. The question is scale and speed. Can these sectors grow fast enough to offset a structural reliance on oil revenue that still dictates whether budgets balance or bleed?

The Reality Check

Alberta has been talking diversification for decades. The tools exist: the Sustainability Fund for short-term stability, the Heritage Fund for long-term wealth, the diversification strategy for structural change. What's missing is the political will to deploy them in concert, rather than as competing narratives.

Until that changes, Albertans will keep hearing the same refrain every time oil prices tank: brace yourselves.