Alberta Premier Danielle Smith took to the airwaves on Feb. 21 to tell the province her government wants to rebuild the Alberta Heritage Fund as a way to move the province off the boom-and-bust cycle of an economy that depends heavily on oil.
“In 2023, our province required about $16 billion of resource royalties just to balance our roughly $70 billion provincial budget,” Ms. Smith said in her address to the province ahead of releasing her government’s budget.
“Thankfully, we had a good year,” she said. “That said, we simply cannot continue to rely on $16 billion or more in resource revenues to balance our budget, year in and out—that is a recipe for massive debt and cuts to health and education.”
Her remarks come as the province’s United Conservative government prepares to release its 2024–25 budget on Feb. 29.
The premier said with lower oil and gas prices predicted in the coming year, the government is going to have to show restraint in spending—although she added it will not mean spending cuts.
However, she said, it will mean delays in tax reductions that the government had planned to bring in.
“It is time for our province to implement a long-term strategic financial plan that gets us to a stable, balanced budget each and every year with predictable and stable revenues to fund our core social programs,” she said.
She also ruled out raising taxes.
“Some say the answer is higher income taxes or a sales tax. I reject this. We only need to look at some of our fellow provinces and many U.S. states to know that increasing these kinds of taxes to balance a budget is a recipe for economic decline,” said Ms. Smith.
Instead, the premier took a cue from the past, to the Alberta Heritage Fund first set up by former Premier Peter Lougheed in the late 1970s. The fund was established to invest some of the province’s non-renewable resource revenues for future generations.
Ms. Smith said the government plans to start a disciplined program of investing in the fund, in good years and bad.
She pointed out that if the province had simply left the initial $12 billion in the fund from the late 1970s, it would be worth over $250 billion now.
“This means we would have been earning enough interest today to make us entirely unreliant on resource revenues,” she said.
She said the province plans to put $3 billion of surplus and investment into the fund, which should increase its value to about $25 billion by the end of this fiscal year.
“In my view, our province has one last shot at getting this right,” she said. “We still have several decades during this global energy transition where nations will desperately need our oil and gas resources for their people. And we will provide it to them with the most advanced environmental technology on earth.”
But, she said, building up the Heritage Fund to the point where it can cushion the ups and downs of the resource economy is going to take years of disciplined investing and management.
“Instead of spending all that non-renewable surplus cash on the wants of today, we will be fiscally disciplined, invest in the Heritage Fund annually, strategically pay down maturing debt, and slowly but surely wean our province’s budget off the volatile roller coaster of resource revenues,” she said.
Ms. Smith added that she has already instructed the finance minister to keep government spending under the legislated rate cap of inflation, plus an adjustment for population growth, in good years and bad.
On a brighter note, Ms. Smith said she believes the province’s energy resources will lead to sustained economic growth.
“I believe our province is on the cusp of an unprecedented and prolonged energy resource boom that will include both hundreds of billions in investment and tens of thousands of new jobs,” she said. “Not only in oil and gas production, but also in designing and building the most advanced emission reduction technologies on earth.”
She predicted “an exciting time for our province and for Canada, especially once we finally get a federal government that acts like a strategic partner rather than a delusional adversary.”
The province will release a long-term financial plan later this year to get the Heritage Fund to between $250 billion to $400 billion by 2050, the same year Alberta hopes to achieve a carbon-neutral economy.
“There is no doubt in my mind we are capable of achieving these goals, but we need to start today and stick with it fervently year after year,” she said.
The NDP opposition said the premier’s speech did nothing to address problems in health care or cost-of-living pressures faced by many in the province.
She added, “Sticking with the UCP’s status quo in next week’s budget will mean another year of underfunded health care, overcrowded emergency rooms and hundreds of thousands of Albertans living without a family doctor.”
Ms. Gray’s statement also accused Ms. Smith’s UCP government of being too distracted by its proposal to leave the Canada Pension Plan to recognize how much the cost of living has risen.
However, Ms. Smith said getting off the cycle of resources revenues is crucial.
“I ask for your support as our government commits itself to placing our province on this path to prosperity that will last long after our last barrel of oil has been produced,” she said.
