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Alberta vs. Texas: Study Shows Why Similar Economies Face Opposite Fiscal Realities

Similar economies, opposite fiscal realities.

Alberta and Texas – both energy-rich jurisdictions, both coming off economic booms due to falling oil prices, both feeling the pinch.

However, a new study from the Fraser Institute suggests that mismanagement and government spending has left Alberta in a worse slump than the Longhorn State.

"When you look at the fiscal situation in the two places, the story is quite different," Ben Eisen, co-author of One Energy Boom, Two Approaches: Fiscal Restraint Has Left Texas in Better Shape than Alberta, told the Edmonton Journal.

According to their findings, here's why Texas comes out on top:

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Government spending per person in Alberta increased by 49 per cent between 2004-2014. In Texas, it only increased by 37.3 per cent.
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In 2004/05, Alberta spent 68.4 per cent more per person than Texas.
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By 2013/14, Alberta was spending 82.8 per cent more per person than Texas.
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"The spending increases (in Alberta) were faster than the rate of inflation plus population, faster than the rate of economic growth and that’s what created the problem," Eisen told the Financial Post.
Topher Seguin / Reuters
The absence of disciplined spending left the province with a string of budget deficits, leading to "significant erosion in its financial position," says the study.
From 2009-2013, Texas ran surpluses.
Todd Korol / Reuters
From 2009-2013, Alberta ran deficits.
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In 2006/07, Alberta held net assets representing 12.4 per cent of provincial GDP. By 2013/14, those assets had declined to 2.9 per cent.
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By contrast, Texas saw very little change in its asset position in this period.
The Fraser Institute
Oil and gas activity contributes 27.4 per cent of Alberta’s total GDP, while it only contributes to 12.3 per cent of Texas’s GDP – showing more diversity in Texas's economy.
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