An unprecedented reversal of fortunes has left Alberta with a $3.9-billion surplus from the previous fiscal year, and Alberta’s finance minister says he’s determined to avoid previous governments’ missteps of spending the glut of oil and gas cash all at once.
“What goes up will come down,” Jason Nixon said Tuesday in his first fiscal update as finance minister.
Paying down debt, saving for the future, and keeping the price of public services manageable for Albertans are the government’s priorities, he said.
“I think it is incumbent upon us at the moment to ensure that we strategically use these resources to help Albertans through these issues right now, particularly inflation and affordability,” he said.
“But do it in such a way that we don’t create problems for future governments when those oil and gas prices come back down,” Nixon said.
Nixon said he intends to introduce legislation in the fall that would allow governments to reinvest more interest generated by the Heritage Savings Trust Fund. Right now, the law requires the government to leave enough money in the fund to account for inflation, and transfer the rest into general revenue.
The fund is now valued at $20 billion after a successful year with nearly 12 per cent returns.
Nixon said he’d reveal more specifics later on how the United Conservative Party government intends to use its unplanned surplus.
Alberta pulled in 56 per cent more revenue during the 2021-22 year than initially forecasted, according to the government’s latest fiscal update, released Tuesday.
Skyrocketing oil and gas prices sent a record $16.2 billion in non-renewable resource revenues into provincial coffers, eclipsing the previous record of $14.3 billion in 2005-06.
In spring 2021, the province was staring down an anticipated $18.2-billion deficit for the year ahead.
Economists predicted the average West Texas Intermediate benchmark oil price would be $46 US per barrel. But oil prices exceeded expectations, then shot up during the final two months of the fiscal year as Russia began its invasion of Ukraine.
The average price of oil last year was $77 US per barrel. It currently sits at $111.
Trevor Tombe, a University of Calgary economist, said the dramatic financial about-face may be the largest in Canadian political history.
“Hopefully saving those dollars is at the top of the agenda,” he said on Tuesday.
Investing large proportions of surpluses now will translate into years of higher investment income that could be used to pay down the debt or fund public services, he said.
Tombe said low-income Albertans are being hit hardest by rising prices, and that the provincial government could easily afford to send $125 rebates to all households to help consumers offset the punishing cost of living.
As people tried to move beyond the COVID-19 pandemic, economic activity increased, and the provincial government collected more corporate and personal income taxes than expected.
Both increased oil prices and more oil and gas production facilities reaching payout — which allows the government to collect higher royalties— contributed to the record-breaking resource revenue haul.
About half of the province’s income came from non-renewable resource revenues.
The government also said its partial purchase and renegotiation of the arrangement governing the Sturgeon Refinery saved money.
Opposition wants Albertans to reap the benefits
NDP leader Rachel Notley said Tuesday the province’s windfall had little to do with the government’s efforts to curtail spending.
She also noted school boards underspent education funding and said that there could have been more money invested in the beleaguered EMS system.
Notley said the government can afford to re-index income tax brackets and social support programs to rise with inflation.
“It is not enough for this government to pat itself on the back and throw itself a party while we see families struggling in a way they have not for 40 years,” she said, pointing to rising household expenses, and taxed health-care and education systems.
The Opposition is working with experts to craft a proposal for how they would use the province’s surplus, she said.
Also in Tuesday’s fourth-quarter update, the provincial debt hit $93 billion on March 31 after the government repaid $1.5 billion it owed.
The government also spent $2.5 billion more than planned. Overall expenditures were $64.4 billion last year.
The government’s COVID-19 response and recovery was more expensive than anticipated, with health-care costs coming in $1.7 billion more than budgeted.
Dispensing $2.9 billion in disaster relief to farmers hammered by drought during the summer of 2021 also drove up expenses.
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