January 20, 2022

Pre-Budget Submission for the Provincial Government 2022 Budget

The Business Council of Alberta (BCA) is pleased to provide ideas and recommendations to the Government of Alberta in advance of its 2022 budget. We are a non-partisan, for-purpose organization composed of the province’s largest enterprise chief executives and leading entrepreneurs. Our members represent the majority of Alberta’s private sector investment, job creation, exports, and research and development. We are dedicated to building a better and more prosperous Alberta within a strong Canada.

In 2021, Alberta’s economy enjoyed a strong rebound after an exceptionally difficult 2020 where unexpected economic, social, and health challenges upended our lives and threatened our businesses. This rebound was led by higher-than-expected oil prices, which have driven economic growth and boosted resource royalties, greatly improving the province’s short-term fiscal outlook.

That said, the rampant spread of Omicron and continued disruptions due to the virus cloud Alberta’s 2022 economic outlook, threatening to delay a full recovery, as well as Albertans’ longer-term health and well-being.

For these reasons, we believe prudence is needed in the 2022 provincial budget. Oil prices may be at the top of a commodity price cycle, but it would be a mistake to assume that royalty revenues will remain at their current elevated levels for years to come. We are looking for the province to provide a pathway to fiscal sustainability, to make strategic investments that will fuel economic recovery in this province, while also to set Alberta up for sustainable long-term growth.

With those considerations in mind, we offer the following ideas for consideration as the Alberta government prepares its 2022 budget.

Balance economic recovery with surging COVID cases

By far, the biggest and most urgent challenge facing Alberta is the rapid spread of the Omicron variant and its potential impact on the health and welfare of Albertans, as well as on the province’s economic recovery.
The rapid spread of this variant is causing considerable uncertainty both in Alberta and around the world. A balance must be struck between protecting those at risk from COVID without causing excess economic and mental health hardship on the broader population. Where this balance lies is a difficult question to answer, and the appropriate policy response may change as time passes.

As such, we believe the provincial government should take the following steps in its 2022 budget. First, in its 2021 budget, the provincial government included $2.5 billion in contingency amounts for disasters, COVID-related spending, and recovery initiatives. Given the uncertainty we presently face regarding the fifth wave of COVID, we recommend the government include a similar contingency amount in its 2022 budget.

Second, in 2021, the provincial government increased health care spending by a little over 4%, largely in response to the pandemic. The budget also froze health care spending for each of the following two years. The pandemic has not only strained capacity in Alberta’s hospitals, but it has also caused a significant backlog in the delivery of elective surgeries and other medical treatments. While we acknowledge the need for fiscal prudence, in light of this reality, we encourage the government to allocate more resources in the short term to bolster our health care system.

Finally, it is critical that the government continue to support Albertans and businesses during this pandemic, especially if additional restrictions become unavoidably necessary. This includes mental health supports, access to vaccines and rapid tests, and income supports for affected individuals and businesses. In particular, we recommend the government allocate funding to ensure vaccine access programs for Indigenous communities, rural parts of the province and remote worksites, especially given the need for booster doses over the long term.

At the same time, we caution against excessive measures to shut down normal economic activity, including restrictions on inter-provincial travel, which will cause significant economic harm without any offsetting improvement in health and safety.

Continue supporting Alberta’s fast-growing tech sector

Alberta’s burgeoning tech sector is a tremendous growth opportunity for the province. The sector has gained considerable momentum in recent years. Technology and innovation represent not only an economic diversification opportunity for Alberta, but they are also critical horizontal enablers as well. A strong local tech sector has spillover benefits into every other industry in Alberta, improving competitiveness, productivity, investment attraction, and long-term economic growth.

The provincial government has taken several steps to support growth in Alberta’s tech sector. We applaud its adoption of many of the recommendations made by the Innovation Capital Working Group (ICWG). Most recently,the Alberta government announced the Accelerated Tech Pathway, which provides a fast track to permanent residence for highly skilled tech professionals who want to live and work in Alberta. These measures will help drive growth in venture capital investment and core tech companies, as well as attract new foreign investment and skilled workers to the province.

We believe that additional public support measures will add to this momentum, fueling short-term economic recovery as well as longer-term economic competitiveness. Alberta will need to invest more in the digital economy and in early-stage and scale-up funding. Doing so will help set the province up for future success in an economy that highly values ideas, innovation, and technology.

Specifically, we would like to see the following two recommendations from the ICWG report included in the provincial budget:

  • Establish the Premier’s Advisory Panel on Technology and Innovation, which would provide strategic advice, stewardship, and guidance to the government to ensure that Alberta continues to develop a competitive and robust innovation ecosystem; and
  • Create the Alberta Venture Capital Investment (AVCI) Fund. The AVCI Fund would be a three-year, $200 million public-private co-investment fund, financed out of the Alberta Heritage Savings and Trust Fund. It would de-risk private investment in technology, and by so doing, increase the availability of capital.

Enhance access to and delivery of workforce development programs

We need a more coordinated and strategic approach to provincial training and workforce development program delivery in Alberta. Currently, workforce development programs live in silos. The Government of Alberta delivers programs out of three main departments: Advanced Education, Labour and Immigration, and Community and Social Services. While each department brings valuable services and resources to the table, inter-departmental collaboration is low, leading to a piecemeal approach to workforce development—and this is causing people to fall through the cracks.

Given Alberta’s relatively high unemployment rate, the rapidly changing nature of work, labour shortages reported by businesses, and a looming energy sector transition, BCA believes that the Alberta government needs to develop and implement a coordinated workforce development strategy to address these challenges.

While we do not suggest that existing programs move out of their current departments, we believe that the government should appoint a central ministry such as Jobs, Economy and Innovation (JEI) to take the lead in creating and executing this strategy. JEI would not deliver programs itself but would coordinate labour strategy, service coordination, and allocation of funds to service delivery ministries.

At the same time, because similar programs and services are dispersed across a range of government ministries, individuals and businesses face challenges navigating the sheer number of re-skilling and training support programs available. It is difficult for workers and employers to know what programs are available, where to find them, how to apply, and what supports they are eligible to receive.

Businesses and individuals would benefit from increased simplicity and clarity where existing training supports are streamlined and consolidated; and a one-stop window is created to guide individuals and businesses to specific programs.

Reform the Canada-Alberta Job Grant and the Alberta Jobs Now program to better target workforce training and development opportunities for unemployed Albertans

Throughout 2021, Alberta consistently had the highest or second-highest rate of long-term unemployment in the country. And while our long-term unemployment rates have started trending downward, Albertans are still struggling more than other Canadians to find work.

Persistent long-term unemployment presents serious problems for Albertans and Alberta’s economy. Being unemployed for an extended period of time is linked to atrophy of skills, lower lifetime earnings, and greater difficulty re-entering the workforce. It can also take a toll on an individual’s physical, mental, and financial health. From an economy-wide perspective, if a large cohort of Albertans are unable to find work, that can lead to lower consumer spending, lower tax revenues, and higher public spending on social services. Over time, these all lead to slower rates of economic growth and a weaker fiscal position for the provincial government.

BCA views the Canada-Alberta Job Grant (CAJG) as one of the most effective training support programs available to Alberta businesses. That said, there are opportunities to adjust the CAJG to create additional incentives to train unemployed Albertans and encourage training investment at times when companies are considering reducing their staff. The CAJG already supports training for unemployed Albertans, but at present, only a small fraction—around 2%—is used for this purpose. The provincial government should:

  • Devote a fixed percentage, in the range of 10%, of CAJG funding exclusively to training unemployed Albertans;
  • Remove existing conditions that require businesses to hire or to have extended a job offer to an individual before they can qualify for training support under the CAJG; and
  • Work with the federal government to increase CAJG funding to expand the program so that employees facing termination are eligible for 100 percent government-funded training support in the same way as individuals who are unemployed.

In 2021, the Alberta Jobs Now (AJN) program was a valuable addition to the jobs training landscape. BCA believes that the AJN could be an even more successful vehicle for helping the long-term unemployed find work with some minor tweaks. The provincial government should:

  • Limit access to the AJN program to employers who hire unemployed Albertans;
  • Expand incentives (similar to the deeper subsidy for persons with disabilities) to hire people in groups with higher levels of unemployment (e.g., recent immigrants, youth, recent graduates, visible minorities, and Indigenous Peoples); and
  • Transition the AJN to a permanent, wage-subsidy program that provides long-term support to help the long-term unemployed gain jobs.

Position Alberta to be the centre of Canada’s R&D, scaling, and commercialization efforts to reduce emissions and create low-carbon solutions

Alberta’s heavy-emitting, hard-to-decarbonize industries produce a significant share of Canada’s greenhouse gas (GHG) emissions. Therefore, it is an inescapable reality that much of the progress towards Canada’s 2030 and 2050 climate goals must be made in Alberta.

While challenging, this creates tremendous opportunities for Alberta. With the right policy framework in place and the necessary scale of ambition for the challenge at hand, Alberta’s energy, industrial, and agriculture sectors can seize this once-in-a-lifetime opportunity to lay the foundation for a sustainable and prosperous future.

First, a commitment to a simple, predictable, and transparent carbon price over the long term is a key to incentivizing the major clean tech investments needed to decarbonize heavy industry, oil and gas, and electricity—especially with their projects’ long-range investment horizons and high capital costs. Rather than adjusting it’s carbon tax year-to-year, Alberta should clearly signal to businesses its intention to price carbon emissions in alignment with the federal government’s plan through 2030 and work with the federal government to agree on a carbon price escalator beyond 2030 that is tied to an easily measured index such as the Consumer Price Index. Alberta should resume jurisdiction of the federal fuel tax and use the revenues to rebate low-income Albertans , as well as support research, development and deployment of low-carbon technologies and solutions. A clear, long-term carbon pricing scheme will send a positive signal to climate-conscious investors that Alberta is serious about tackling emissions.

Second, carbon capture, utilization and storage (CCUS) shows tremendous potential to help drastically reduce emissions from Alberta’s hard-to-decarbonize sectors. CCUS in Alberta is scaling up, but not fast enough. We have the right mix of expertise and geology to become one of the world’s natural homes for CCUS innovation and deployment. We encourage the province to work with industry and the federal government to provide sufficient funding to CCUS to capture the opportunity that exists for Alberta to be a global leader in this area.

Finally, momentum is growing for low-carbon hydrogen. Hydrogen shows great promise as a low-emitting fuel in heavy-duty transportation; industrial processes requiring high heat; utility-scale energy storage fuel for electricity grids; and, to a certain extent, in fuel mixing for residential and commercial heat. Maximizing hydrogen’s potential for production and use in Alberta requires:

  • Positioning the Industrial Heartland and the City of Edmonton as Canada’s first major hydrogen hub to provide large-scale proof-of-concept;
  • Building up the hydrogen market with an emphasis on the demand side;
  • Conducting feasibility studies, in partnership with industry, for the long-term economics of deploying hydrogen;
  • Identifying and removing technological barriers to hydrogen adoption and investing in R&D to address them; and
  • Establishing enabling policies, standards, legislation, and regulation to clear the path for hydrogen production, transportation, and use.

Covene a panel of experts on the province’s revenue model and set a clear path to fiscal sustainability

The province, supported by the Blue Ribbon Panel chaired by Dr. Janice MacKinnon, has already done the hard work on the spending side of the ledger to bring provincial government expenditures in line with peer provinces. Now, the government should turn its attention to the revenue side. More than just raising taxes to eliminate deficits, this is an opportunity to build a revenue model that is stronger, more resilient, and more competitive.

To be sure, Alberta’s Mid-Year Fiscal Update showed an immense improvement in this year’s deficit as well as the expectation for the next few years. The revised forecast shows the deficit is now expected to be as low as $2.3 billion in 2023-24, down from the $8.0 billion forecast earlier this year. Though encouraging, the same underlying problem remains: the unpredictable nature of provincial revenues due to their dependence on a volatile resources market.

Looking ahead, it seems the province’s dependence on resource royalties to balance the books will continue to be problematic. Notwithstanding the current spike, revenue from resources has generally declined over time, and future forecasts are increasingly difficult in the face of an ongoing pandemic; decarbonization; national and international policy changes; and changing consumer demand.

As such, we urge the provincial government not to let the recent surge in royalty revenues distract from the important work of building long-term fiscal sustainability. Now is time to ensure that Alberta is preparing for its future by creating a stronger, more resilient and, most importantly, more competitive revenue model to support the prosperity of current and future generations of Albertans.

The provincial government faces many challenges as it prepares its 2022 budget: ongoing uncertainty as the pandemic continues; high levels of long-term unemployment; and pressures to meet ambitious climate targets. We are at a pivotal junction in Alberta where we must take steps that set us on a pathway towards innovation, meaningful emissions reductions, and fiscal sustainability. With investments in the priorities outlined above, Albertans will benefit for years to come.

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