CALGARY—As the new United Conservative government takes power, one economist says painful choices about new taxes or long-term cuts are ahead.

Even with the UCP’s plan to balance the books, University of Calgary economist Trevor Tombe sees big financial challenges in the province’s future as Alberta struggles with health-care costs for an aging population and declining resource revenues.

Tombe said the magnitude of the province’s “budget problem” is clear in one path he has mapped out for sustainable finances: a spending freeze that lasts to 2040.

“That would be unprecedented,” he said. “Almost surely there are a lot of better options than just this one.”

But even with the UCP’s current plan to get to balance with a spending freeze until 2022, “There is a gap between what spending is and what revenue is,” Tombe said. “That gap is projected to continue — it’s not going to go away even if we balance by 2022. Those pressures remain.”

Alberta’s looming fiscal hole would see net debt approach a huge 50 per cent of the GDP by 2040. The UCP’s plan goes part of the way toward addressing that, Tombe said, but debt will eventually begin to grow again, especially as resource revenues aren’t projected to bounce back any time soon to pre-recession levels.

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“Balancing by 2022 addresses half of the fiscal challenges the province faces, and the other half is still there and needs a good deal of attention that we’re not giving it.”

Tombe has pointed out in the past that Alberta governments have relied on oil and gas royalties too heavily. The UCP’s current projections offer a plausible path to balance, in his view, but more needs to be done than holding the status quo past 2022.

“Taking action today knowing where we’re headed means that we can avoid drastic changes either on the revenue or the spending side, rather than waiting for the crisis to occur,” he said.

The increasing burden of health spending for a population that’s getting older isn’t unique to Alberta, Tombe points out. But the way the province tends to lean on resource revenue doesn’t leave room to prepare for economic shocks like the 2015 downturn.

The UCP also plans to set up a panel tasked with reviewing government spending across the board to look for “efficiencies,” and that could help the province find a balanced way forward.

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But Tombe said the task of getting Alberta off the resource roller-coaster can’t be left to the last minute, and Albertans will need to carefully weigh the pros and cons of a number of options for the future.

“There are some difficult choices associated with tackling that,” he said. “I think there has been maybe too much focus on our short-term challenges at the expense of considering options to tackle the long-term ones.”

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