Alberta’s budget shows it’s not the absolute best of times, but it’s still close

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Alberta’s NDP Opposition promises this will be Premier Danielle Smith’s first, and final, budget. But the document, released Tuesday, gives the now-governing United Conservative Party an advantage with fistfuls of cash and ample room to manoeuvre before the rapidly approaching May election.

Over all, it’s not the absolute best of times for Alberta budget-makers, but it’s close. Amidst global economic uncertainty, the province took in its highest-ever non-renewable resource revenues this fiscal year – $27.5-billion – substantially more than the $14.3-billion recorded in the heady days of 2005-06. The second highest amount will likely be the 2023-24 fiscal year, which begins in a month.

The oil price forecast is near US$80 per barrel for the coming year, and royalty rates from oil sands projects have reached a point of maturity and being paid at a higher percentage than they’ve ever been. Balanced budgets and surpluses are likely to be the norm for the next few years. The provincial debt, with more than $13-billion paid off this year, is down to near what it was before the financially (and otherwise) disastrous COVID-19 pandemic.

This leaves the province with a projected surplus of $2.4-billion.

And Finance Minister Travis Toews has followed through with his promise for setting the parameters of a fiscal framework, including “guardrails” to guide the use of surpluses through the creation of a new Alberta Fund. Paying off maturing debt is the first priority of the fund.

But Ms. Smith’s UCP will, if it chooses, be able to use hundreds of millions of dollars in the fund for “one-time initiatives” as soon as the new fiscal year begins on April 1. The rules for the fund allow for much in the way of election-style announcements – including capital projects or temporary programs that help with the pain of inflation – before the official start to campaigning.

Still, Mr. Toews told reporters the creation of the fund is “anything but” a political act.

Operational spending is going up – health care, for instance, is getting a 4-per-cent funding boost in the coming year, which includes the infusion of new federal dollars. But the increase to continuing spending commitments are well below the 8.7-per-cent ceiling set by the government, calculated by prior year population growth plus rate-of-inflation. The NDP and other critics will say overburdened health and education systems are still being vastly shortchanged.

In speaking to reporters, the Finance Minister also said a long-awaited analysis of the opportunities and risks of Alberta breaking away from the CPP to establish its own pension plan will be updated and completed in May.

Mr. Toews, who was the runner-up to Ms. Smith in last fall’s UCP leadership race, also spoke to another key question in Alberta political circles, telling reporters he would be finalizing a decision on his political future and announcing it in the days ahead.

Alberta non-renewable resource revenue forecast to hit record high of $27.5-billion

Alberta’s pre-election budget posts $2.4-billion surplus, puts health workers and education in spotlight

The Alberta 2023-24 budget again lays out the pleasure and pain that come when a province counts on oil and natural gas revenues. Two years ago, the budget for the province already weakened by a stretch of low energy prices was beyond grim. The deficit was forecast at more than $18-billion, a combination of pandemic health restrictions, a worldwide global slowdown and the collapse in energy prices. Then, demand for oil and natural gas shot up, based on a rebounding global economy, supply shortages and fallout from the Russian invasion of Ukraine.

The budget also highlighted how Alberta’s dizzying highs and lows have been more dramatic than ever before.

“Revenue jumped by $25.2-billion and $7.7-billion in 2021-22 and 2022-23 respectively, leading to the substantial $5.4-billion drop in 2023-24 – the largest decline in revenue since the $6.9-billion drop following the global recession in 2015,” the budget says.

“Revenue was $68.3-billion in 2021-22 and is forecast to be over $70-billion in 2022-23 and the next three years. The previous highest total revenue was $49.5-billion in 2014-15 and 2018-19.”

Despite theses ups and downs, the document paints a mostly rosy picture for the near term. People will be drawn to the province by jobs and the relative availability of affordable housing, it says. The fuel tax suspension and electricity rebates helped lower Alberta’s inflation rate. Some of the province’s long concern about pipelines will be eased with the completion of Trans Mountain Expansion late this year.

The budget makes almost nostalgic reference several times to the period more than 15 years ago, when the commodities supercycle – powered by a rising Chinese economy – was at full tilt. Right now, Alberta’s population growth rate is forecast to rise to 2.9 per cent in 2023, the budget says, the “highest pace since 2006.”

But the situation is much different from 2006 for the industry-heavy province: There’s now much more uncertainty about where the global economy is headed, or the future of federal energy and environment policies. Climate concerns are being treated with far more urgency. Alberta could see engineering and regulatory work on new carbon-capture infrastructure start this year, but there are no new oil sands projects on the horizon, the budget notes.

There are high energy revenues, for now. However, many oil producers will still be gun-shy about any new activity. And the UCP budget prediction that 2023 will be a year where “solid energy prices and strong cash flows from 2022 will support drilling activity, production and investment in the sector” is still an open question.