A former senior Alberta finance official is pouring cold water on Alberta independence projections, warning a sovereign province could carry $364 billion in interest-bearing debt.
Lennie Kaplan, formerly of the Alberta Treasury Board and Finance and a MacKinnon Panel executive director, is challenging key assumptions behind the Alberta Transition Council’s fiscal plan.
The ATC’s Forward to Freedom report argues an independent Alberta could maintain existing services, take over federal responsibilities and still have between $22.2 billion and $32.1 billion in annual financial room.
Its separate Budget and Costing Report puts one-time transition costs at roughly $5 billion over three years, plus $3.63 billion annually in additional permanent costs.
Kaplan argues the plan leaves major fiscal questions unresolved, particularly over federal debt, borrowing costs and replacing federal services.
“The Alberta independence movement, including the ATC, should not assume that by virtue of Alberta becoming independent, the provincial government can magically grow its way out of deficit and financial debt,” Kaplan told Juno News.
Kaplan estimates Alberta could be allocated $238 billion in federal debt, bringing total interest-bearing debt to $364.1 billion — or $68,871 per person — by 2029.
His $238-billion estimate credits Alberta for roughly $130 billion in historical net contributions to Ottawa, with the remaining federal debt allocated on a per-capita-like basis.
After financial assets are counted, Kaplan puts net financial debt at $183.6 billion, falling to $81.2 billion when other federal assets are included.
Debt to GDP would hit roughly 63 per cent, with annual servicing costs reaching $12.3 billion, including a $2.38-billion borrowing risk premium.
“At these debt burden levels, an interest rate premium of around 100 basis points would make an independent Alberta’s fiscal consolidation efforts more severe,” Kaplan wrote.
Kaplan also projects a $16-billion deficit in 2028-29 and nearly $75 billion in cumulative deficits over five years.
“A fiscal consolidation or adjustment of $16 billion, about 10% of program expenses, $3,027 per person or 2.8% of GDP, could be required in 2028/29 just to bring the Government of Alberta back into surplus,” he wrote.
The former bureaucrat describes his analysis as a “best-case scenario.”
His $364.1-billion figure measures total interest-bearing debt, unlike the ATC’s roughly $5-billion estimate for one-time transition costs.
However, the gap extends beyond debt.
Kaplan calculates the ATC accounts for roughly $13 billion annually in additional expenses from assuming federal functions and obligations. The University of Calgary, using broader assumptions, modelled $60.2 billion.
University researchers also modelled a tougher scenario in which Alberta’s economy would be 16 per cent smaller after 20 years, employment five per cent lower and annual deficits could exceed $30 billion.
A more favourable outcome assumes continued trade access, resource development and government efficiencies.
Kaplan’s own previous analysis estimated separation could carry $206.8 billion in initial costs and $57.6 billion in annual expenses, while shrinking Alberta’s economy by roughly $39 billion.
He argues the ATC does not fully model potential economic, employment or trade impacts, or costs surrounding trade access, payment systems, passports and migration.
Kaplan estimates trade friction could cost at least $10 billion annually and NATO-style defence spending roughly $10.9 billion.
“Uncertainties and risks are treated as things to negotiate later on after separation,” Kaplan wrote. “But once you uncork the bottle and drink from the potentially bitter wine of separation, there is no turning back.”
The ATC acknowledges it does not forecast output, employment or trade, but stress tests several adverse scenarios.
Under its combined stress test, the council projects $13.5 billion in additional annual costs while still leaving $8.7 billion to $18.6 billion in financial room.
Kaplan argues a realistic independence plan requires a fuller accounting of Alberta’s finances.
“Clearly, developing a realistic plan for fiscal sustainability will have to be an independent Alberta government’s first priority,” he wrote, warning it could require “some difficult policy decisions.”
More scare tactics, fear mongering and overall BS from the loonies on the remain in Canada side. Alberta you must vote option 2 or Carney and his henchmen will destroy you after October 19. The bastards will nationalize the oil industry. Ask how that worked out for Venezuela. Get Alberta out of the nut house called Canada before it is tool late.