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Alberta heads into provincial budget day with healthy oil surplus

alberta heads into provincial budget day with healthy oil surplus

The Alberta government is set to unveil its first budget under Premier Danielle Smith on Tuesday with a provincial election looming three months ahead.

With the provincial treasury anticipated to be overflowing with non-renewable resource revenues, observers are waiting to see if Smith’s government opts for more spending, bolstering its savings, or prioritizing debt repayment.

These key decisions come as public opinion polling shows support for Smith’s United Conservative Party government almost on par with the Opposition NDP, says University of Calgary political science professor Lisa Young.

“The budget is a real opportunity for the premier to set out a path for the government, and to communicate what’s almost certain to be a good news story to the Alberta electorate,” Young said in an interview Monday.

After years of economic pain inflicted by low oil prices, a sluggish economy and the COVID-19 pandemic, stratospheric oil prices in 2022 are expected to leave Alberta coffers with a record $28 billion in resource revenues.

As of November 2022, the finance ministry was forecasting the government’s 2022-23 year would end with a $12-billion surplus. Smith’s government has since unveiled more spending promises, such as a $2.8-billion package of affordability measures.

Smith has previously hinted at spending on more short-term programs to help citizens with the cost of living after a period of punishing inflation. She has also winked at spending on public infrastructure projects, like new roads and schools.

In her mandate letter to Finance Minister Travis Toews, Smith said any increase in spending should be lower than inflation plus population growth.

University of Calgary economics professor Trevor Tombe says this window still gives Toews billions of dollars of leeway.

If oil prices hover at their current levels, around $75 per barrel U.S., it leaves Alberta dependent on these revenues in the long-term to fund public services, Tombe said.

As the oil and gas sector’s boom-and-bust cycle is doomed to repeat, Tombe said a provincial conversation about a more sustainable source of provincial funding is overdue.

“It would be important for the province’s long-term fiscal future if we start that conversation now, especially going into the election, and make choices about saving resource revenues,” he said.

Smith’s government delayed a plan last year to increase the amount it would inject into the Heritage Savings Trust Fund.

During the past few weeks, ministers have been soft-launching new investments in advance of budget day, including a funding boost for mental health and addiction, $158 million for a new health workforce strategy to address staff shortages, and bursaries for internationally trained nurses, among others.

Smith’s government has also capped post-secondary tuition increases to two per cent per year, pledged millions for motorized recreational trail maintenance and earmarked money for the City of Grande Prairie, should council choose to establish a municipal police force there.

Tombe will be looking for other policy clues among the budget’s line items, such as any investments to prepare for creating a provincial pension plan, establish a provincial tax collection agency or form a provincial police service.

Four years after ditching the former NDP government’s provincial carbon tax, Smith may also opt to replace the federal consumer carbon tax with a provincial version, Tombe said.

NDP finance critic Shannon Phillips said on Monday she expects the government to table a campaign-style budget — one that does little to bolster the province’s economic resilience.

Phillips said the government has no thoughtful plan to improve a struggling health-care system, or fund K-12 schools to keep up with population growth and inflation.

Affordability programs that grant millions of Albertans rebates on their power bill, and send $100 monthly payments to parents, seniors and people with disabilities, are chaotic and exclude vulnerable people, Phillips said.

“Who knows what kind of spaghetti that they’re going to throw at the wall this time?” Phillips said.

Toews is expected to table the 2022-23 budget in the legislature just after 3 p.m. Tuesday.

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