Alberta Premier Danielle Smith answers questions at a news conference in Calgary, on Feb. 1.Todd Korol/The Canadian Press
Alberta, Danielle Smith has just announced, has one last shot at getting it right. And by it, the Premier means turning the Heritage Savings Trust Fund into a behemoth financial asset – worth as much as $400-billion by 2050 – for “prosperity that will last long after our last barrel of oil has been produced.”
In doing so, Ms. Smith is asking Albertans to believe she is capable of a new way of doing things – even though government raiding of the fund began as soon as its vaunted creator, Peter Lougheed, saw his government run into financial difficulties in the early 1980s.
This time, she insists, an Alberta government will turn some of the world’s largest deposits of oil and natural gas into savings that last. This time, she says, it will withstand the enduring political compulsion to spend.
“Now is not the time for us to bemoan what might have been,” the Premier said Wednesday in a televised prebudget address. “We still have several decades during this global energy transition where nations will desperately need our oil and gas resources.”
But it’s not a coincidence that Ms. Smith chose this moment to announce a long-term strategic financial plan.
Prebudget addresses by Alberta premiers are often reserved for moments when a premier must steel the province for bad news. Jim Prentice did this in 2015 when his government was staring down a $7-billion budget shortfall. Rachel Notley gave a similar address in 2016. Jason Kenney also took to the airwaves in 2019 before his dour first budget.
A broken promise on a $1-billion provincial tax cut is the bad news today. Ms. Smith is advancing a long-term financial stability narrative not only with future generations in mind, but also as a way to distract from her decision to break a key UCP pledge from last May’s election campaign.
The Alberta budget will be released next week, and Ms. Smith said economists are predicting softer oil and natural-gas prices for 2024. “Promised personal income tax cuts will have to wait a year and be phased in responsibly.”
It’s true that there’s a host of unknowns about how the global economy and war in the Middle East will shape prices. But a forecast from the U.S. Energy Information Administration has oil close to $80 per barrel for much of 2024. That’s far from soft, and Alberta is still in position for a likely budget surplus.
The current oil price is also higher than it was last May, when on the first day of campaigning Ms. Smith pledged a provincial tax cut that would save workers up to $760 per year. “This permanent billion-dollar tax cut will provide meaningful, timely tax relief to Albertans at a time when they need it most,” was the framing that helped the UCP win the election against the Alberta NDP.
That was then, it appears. Now, the focus is instead on Alberta’s unsustainable dependence on non-renewable resource revenues.
In taking this approach, Ms. Smith has added mightily to her province’s to-do list for the next quarter century. It’s no longer only her government’s yet-to-be-defined plan to tackle the province’s greenhouse-gas emissions before 2050. Now, she’s talking about taking the Heritage Fund appraised at $21.6-billion last summer, and increasing its value more than tenfold.
These types of ambitious plans for Alberta’s main long-term savings account have gone unfulfilled before. Mr. Lougheed, who created the fund in 1976, meant for 30 per cent of all energy revenues to go to the fund. But that only played out in the first decade of its existence. And for the better part of the past five decades, most of the fund’s earnings have been used for program spending.
However, the UCP passed legislation in 2023 eliminating the requirement for investment income to be transferred out of the fund. This year, Ms. Smith said she hopes to bolster the fund to almost $25-billion. She has also instructed Finance Minister Nate Horner to limit government spending. Beyond that, the detailed plan for making the Heritage Fund a mammoth will be developed by the end of 2024.
Albertans might have good reason to be skeptical. Ms. Smith broke her promise on the tax cut and is trying to keep expectations low for this year.
But she’s promising the moon by 2050, and a long-term discipline that Albertans have rarely seen from their political leaders.