Alberta’s 2023-24 budget is likely to be a positive story for the province

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Travis Toews started out as the apparent front-runner in his United Conservative Party’s leadership race last year. But his brand of button-down conservatism was trumped by now-Premier Danielle Smith, who won by signing up the Albertans angriest with Ottawa and COVID-19 health restrictions.

But Ms. Smith still tapped Mr. Toews to be Alberta’s Finance Minister, the same job he held when he resigned from cabinet to run in what was a fraught five-month UCP contest. And just weeks before next year’s budget is set to be released, it feels like he has simply picked up where he left off.

This is, of course, not a bad budget for a Finance Minister to be presiding over. The economic outlook this year is dicey – there are many contradictory messages about whether global inflation will be tamed without a hard landing. Still, Alberta’s 2023-24 budget is likely to be a good news story. Energy prices aren’t as high as they were last year, but they’re high enough.

“A balanced budget is incredibly important to me, especially based on the fiscal challenges we’ve had the last few years,” Mr. Toews said in an interview this week.

In a column discussing how high energy revenues could enable Alberta to pay off all its debt by 2030, University of Calgary economist Trevor Tombe estimated that if West Texas intermediate oil averages US$75 per barrel next year, the province’s surplus could be nearly $4-billion. At US$85, it could exceed $10-billion.

This surplus will exist not only because of higher energy prices, but also because of an oil sands royalty system that has reached a more mature stage: the post-payout period. This is when initial project costs are covered and producers pay a far higher percentage of their net revenues to the Alberta government. The pace of projects hitting “payout” has ramped up, and the government says that well more than half of the province’s 111 oil sands projects are in that category.

How this windfall will be used is the question. First, Mr. Toews said he will be following through with the government’s promise to use $13-billion of surplus funds to pay off maturing provincial debt this fiscal year. (The surplus is forecast at $12.3-billion this fiscal year, but Mr. Toews notes there’s also remaining surplus dollars from the last fiscal year.)

He said he will be bringing forward a fiscal framework that will provide rules and a policy approach around surplus allocation for future budgets. It will include a discussion of how to build up the Heritage Savings Trust Fund, after a Kenney-era plan to allocate surplus dollars to the fund this year was scrapped last fall by the Smith government.

The UCP will also be offering “additional targeted measures” to ease inflation, including for some of those left out of the $100-per-month affordability payments this year. The plan has so far is focused on helping families that make less than $180,000 a year with children under the age of 18, or those 65 and older. A key point of criticism from the opposition NDP is this “pre-election gift card” plan has meant a key cohort of Albertans who don’t have high incomes have been left out.

When asked whether there will be new help for lower-income workers or postsecondary students, sans kids, Mr. Toews said: “I’m going to say yes, and stay tuned.”

On another topic, the Finance Minister said health care priorities include boosting EMS services, and supports for mental health and addictions. He said the province will pursue these plans no matter what the Premiers decide Monday in response to Ottawa’s offer on new health care dollars.

“We’re not waiting for the federal government. We’re moving forward unilaterally.”

Alberta’s willingness to put more skin in the game when it comes to climate policy will also be an area to watch on budget day. Mr. Toews has argued the federal government needs to do more as it relates to tax incentives or funding for ultraexpensive carbon capture utilization and sequestration (CCUS) projects, arguing the province is “already doing a lot on that front.”

Both the Alberta government, and the oil and gas industry, are asking Ottawa to increase its planned tax credits for CCUS projects so the country is able to keep pace with new credits introduced as part of the U.S. Inflation Reduction Act. That plan offers half a trillion dollars for electric-vehicle production, sustainable fuels and green energy, as well as substantial tax breaks for CCUS.

But when Ottawa’s Finance Minister Chrystia Freeland said last week that “we need the provinces and territories to chip in and work with the federal government” in responding to the IRA, she was clearly speaking to surplus-rich and emissions-heavy Alberta.

Albertans will vote provincially in less than four months, and Mr. Toews insists the tight race with the NDP isn’t going to lead to a whole host of pre-election goodies in the budget: “I’m committed to continue to deliver responsible government and fiscal responsibility, throughout our whole mandate.”

In this vein, many have speculated about his political future and whether he will run again in May for a party where internal divisions are rife – as was on display during the leadership race of last year. The rancher and accountant could go back to his family’s wide-ranging business operation out of Beaverlodge.

Some hint of what’s to come might be seen in his riding of Grande Prairie-Wapiti this weekend, as the UCP constituency association holds its annual general meeting. But Mr. Toews is not making his intentions known yet, indicating he will speak to the election further down the road: “I’m focused on preparing the budget.”