Alberta projects a $2-billion surplus: Do municipalities deserve a piece?

Imagine if the University of Alberta had a few million dollars left to spend after years of running a deficit. It could split the money across departments to hire additional teaching staff and student groups for necessary funding. Or, the university could save it with future expenses in mind. The Government of Alberta is facing a similar dilemma now.

The provincial government is projecting a $2-billion surplus this fiscal year, and municipalities across the province are collectively lobbying the government to allocate a portion of it towards local infrastructure costs. Municipal governments own and manage nearly 60 per cent of Alberta’s public infrastructure, often with revenue from property taxes. However, rising costs are straining local budgets and increasing the need for provincial support. With resource revenues subject to fluctuations, the province must also consider whether it can afford to commit part of a potentially temporary surplus to municipal needs.

Alberta’s municipalities have a legitimate need for additional infrastructure funding. This, however, does not mean the province should divide its surplus among them. Instead, it should consider a targeted, formula-based funding system that recognizes municipalities’ role in supporting the economy, their limited ability to cover unexpected costs through property taxes, and factors such as population growth, infrastructure needs, and fiscal responsibility — all while recognizing that the surplus may not be a permanent trend.

Municipalities may not have contributed directly to the provincial surplus, but the businesses within their boundaries do. These businesses employ residents, pay taxes, and provide goods and services that support economic growth across the province. Local governments also maintain essential infrastructure, including roads, bridges, and water systems, that allows these businesses and communities to function. Without reliable infrastructure, municipalities may struggle to attract new businesses or accommodate population growth. Therefore, allocating a portion of the surplus is ultimately a form of the province’s long-term economic investment.

Unlike the provincial government, municipalities rely heavily on property taxes, user fees, and funding from other levels of government to pay for local services and infrastructure. However, these revenue sources may not keep pace with rising construction costs, inflation, population growth, and unexpected repairs. Raising property taxes can help cover some of these expenses, but it also places a greater financial burden on residents and businesses. For example, a municipality facing major road repairs or water system upgrades cannot simply postpone essential work indefinitely without potentially affecting residents and local businesses. Provincial funding could help municipalities address these costs without relying entirely on higher local taxes or delaying necessary projects.

However, sharing the surplus should not mean dividing it equally among every municipality or funding every project without scrutiny. Alberta’s municipalities differ significantly in population, infrastructure needs, available revenue, and capacity to manage expenses. A growing city facing pressure on its roads and utilities may have different priorities from a smaller community dealing with ageing infrastructure. The province could establish a needs-based funding program that considers these differences, prioritizes essential projects, and requires municipalities to demonstrate responsible financial planning.

Alberta’s projected surplus presents an opportunity to address infrastructure challenges that municipalities may struggle to manage on their own. Although the province must consider other spending priorities and the uncertainty of future resource revenues, supporting municipal infrastructure remains a priority. Roads, bridges, and water systems are essential to the communities and businesses that support Alberta’s economy. Rather than distributing the surplus without conditions, the provincial government should consider targeted funding based on demonstrated needs, financial responsibility and long-term benefits. The goal should not be to reward municipalities with extra money, but to help them maintain the infrastructure Albertans rely on.