One Energy Boom, Two Approaches: Fiscal Restraint Has Left Texas in Better Shape than Alberta

Although both Alberta and Texas both experienced prolonged booms between the start of the energy price rally in 2004 and the downturn in commodity prices starting in late 2014, there are important differences between the two jurisdictions’ economic experiences.  This paper examines the similarities and differences between the two jurisdictions’ experience in recent years, both in terms of overall economic performance and in terms of successful management of public finances by their governments.

The paper finds that find that each jurisdiction has some metrics on which it outperformed the other but, on the whole, it concluded that the two jurisdictions enjoyed comparably strong overall economic performance. By contrast, the paper finds that there was a marked difference between Alberta and Texas in terms of how successfully their governments managed public finances. The absence of spending discipline in Alberta led to a string of budget deficits, something which did not occur in Texas

Alberta and Texas are now on very different fiscal trajectories, as Texas’ financial position is comparatively strong while Alberta faces a potentially costly and economically damaging run-up in debt. One can hope that when Alberta’s economy does recover and begins to grow strongly again, policymakers will have learned the lesson from this energy price cycle and will manage the province’s finances more prudently during good times, in order to avoid painful fiscal consequences in the future similar to those the province is confronting today.

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