February 24, 2022

What a difference a year makes

Alberta budget shows a surging economy, a surplus budget, and a $19 billion improvement in the bottom line

What a difference a year makes. Businesses in Alberta are highly optimistic about this year, and the years ahead, across all sectors, and Budget 2022 reflects that optimism. Alberta businesses welcome the budget’s focus on workforce development, health care capacity, and investment, though some areas of work still remain.

“I’m particularly pleased to see strong focus and funding for jobs, education and skills,” says Adam Legge, President of Business Council of Alberta. “Alberta’s employers can’t find enough people to fill open jobs, and our post-secondary institutions are turning students away from high-demand programs. Therefore, additional funding for post-secondary enrolment growth, and the Alberta at Work program, are positive steps in addressing Alberta’s need for a skilled and educated workforce.”

“While surging resource revenues have played an important role in getting the provincial budget to surplus, the groundwork for this recovery has been laid over the past several years,” notes Legge. “A competitive business environment, and an increased focus on innovation and technology, has put the private sector in the position to capitalize on strong economic opportunities and commodity prices—in agriculture, forestry, and energy. In addition, we applaud the government’s efforts and commitment to aligning expenses with our peer provinces. Both these factors account for a significant percentage of the improved fiscal picture.”

Ahead of the budget, the Council outlined five areas of priority for the people and businesses of Alberta. Here’s how Budget 2022 measured up:

A coordinated and strategic approach to workforce development training that focuses on long-term unemployment

The provincial budget allocates $600 million over three years for a series of investments under its new Alberta at Work initiative. Notably, the initiative includes $171 million to expand post-secondary enrolment in specific high-demand programs. It also provides new money to assist Albertans in finding and maintaining employment; improving their essential skills; and additional funds to improve labour market data collection and dissemination.

BCA is very pleased to see these investments in people and skills. It is a positive step forward when it comes to addressing Alberta’s labour market challenges. Many specific items in the budget directly or indirectly address Alberta’s challenges with long-term unemployment, and ensuring that businesses are able to find workers with the skills they need.

A strategy to support Alberta’s fast-growing tech sector

Alberta’s tech sector has gained considerable momentum in recent years, and we applaud the Alberta government’s commitment to increasing their support for the industry through programs such as 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. Budget 2022 made additional investments for in-demand tech training and education, as well as $73 million over three years to support the Alberta Technology and Innovation Strategy (ATIS). The strategy’s vision is for Alberta to become an internationally recognized technology and innovation hub.

BCA strongly supports this new initiative. The implementation of ATIS is a strong step forward in supporting Alberta’s burgeoning tech sector and will be a key component of preserving and enhancing economic diversification, productivity, and competitiveness in the province.

Ahead of the budget, we suggested the Alberta government adopt two recommendations from the Innovation Capital Working Group report, including establishing an Advisory Panel on Technology and Innovation with the Premier, and creating an Alberta Venture Capital Investment (AVCI) Fund. While we did not see these recommendations reflected in the 2022 budget, we encourage government to consider them for future years.

A commitment to prioritizing health care capacity

Last year’s budget included significant contingency amounts for disasters, COVID-related health care spending, and recovery initiatives. Given continued COVID-related uncertainty, we hoped to see an extension of this in the current budget. In Budget 2022, we were pleased to see $750 million set aside for the province’s continued COVID response and alleviating surgery backlogs. We applaud this prudent and forward-thinking contingency.

Further, we are encouraged by the focus on increased hospital capacity in the coming years, including $100 million per year for initiatives such as new intensive care unit beds and the training of new acute care staff and $90 million per year to attract new family physicians to practice in rural and remote communities. This will be important to ensure that, as the health care system catches up on the backlog of surgeries and procedures, Albertans have continued access to high-quality health care.

A stronger, more resilient, and more competitive revenue model

“As good as this fiscal situation is, and it is very good, structural issues remain; a 43% swing in year-over-year revenue shows the challenge of budgeting with Alberta’s fiscal model,” says Legge.

Alberta is in a vastly different fiscal situation today than we were 12 months ago, but the volatility and uncertainty of our resource revenues remains a central issue for the coming years. With expenses now in line with peer provinces, we were hoping to see the province signal the creation of a panel to create a reimagined revenue model—similar to the MacKinnon Blue Ribbon Panel on expenses—that would work to build a more resilient and competitive revenue model. For instance, the recent increase in corporate tax revenue (up 22%) shows that building a competitive tax and business environment actually pays tax dividends as they result in increased business activity and personal income taxes. Though we are encouraged by the use of fiscal anchors to guide future decisions, there was no mention of the need for a new revenue model.

As well, we were hoping to see the personal income tax thresholds re-indexed to reflect rising inflation and wages over time to end the practice of bracket creep, but were disappointed to not see this reflected.

A plan to position Alberta as the centre of low-carbon innovation

It is an inescapable reality that much of the progress towards Canada’s 2030 and 2050 climate goals must be made in Alberta. While it will be challenging to decarbonize Alberta’s heavy-emitting industries, there are tremendous opportunities for our province to become the centre of low-carbon innovation within Canada.

An essential low-carbon initiative is carbon capture, utilization, and storage (CCUS). The pathway to Canada’s climate targets runs through Alberta, and CCUS is a critical tool in the kit.

“We encourage the provincial government to invest alongside business and the federal government to foster innovation and investment in large-scale in carbon capture utilization and storage (CCUS) here in Alberta,” says Legge.

Another key area of opportunity in Alberta is in producing low-carbon hydrogen. We are pleased to see a $10 million investment for the Clean Hydrogen Centre of Excellence to support hydrogen innovation and technology in the province, but believe that considerably more investment will be needed in future to harness the potential that hydrogen could represent.

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