Alberta is experiencing the most dramatic fiscal turnaround in Canadian history.
The province expects to bring in a windfall of $28 billion in non-renewable resource revenue in 2022/23.
This is more revenue than the previous six years combined and higher than our all-time high in 2005/06.
We are—once again—in a boom.
It’s hard to overstate the magnitude of this change in fiscal position. Less than two years ago, we were facing a $17 billion deficit. Today, the province expects to post a $12.3 billion surplus, with over $10 billion expected over the next two years.
Booms and busts have long been a part of Alberta’s history. And the decision we—once again—face is how can we manage future surpluses to balance short-term opportunities and long-term sustainability.
This report, entitled Three Big Rocks: Priorities to Managing Alberta’s Future Revenue Surpluses, presents three key priorities or “Big Rocks” for the provincial government to use to manage surpluses in a way that balances short-term opportunities and long-term sustainability.
These priorities include:
- INVESTMENT: $1 billion in the Heritage Fund each year for the next two years
- DEBT: Use 80% of the remaining surplus to pay down the provincial debt
- STRATEGY: Use 20% of the remaining surplus to spend and invest in strategic priorities and projects
Surpluses can create big opportunities and big challenges.
Resource royalties have long been lucrative for the province. And as many oilsands projects reach their post-payout royalty rate, this will continue. However, Alberta has never been great at planning for its fiscal future over the long term, and our over-reliance on boom-time royalties has created instability in provincial finances.
Ultimately, a boom doesn’t change our fiscal realities. We still have a sustainability problem.
As we face a potential Canadian and global recession, continued decarbonization efforts, and an ongoing war that has created vulnerability in the global energy market, we can no longer make decisions expecting the next price surge will save our budget. We must take steps to get off the rollercoaster of non-renewable resource revenue and transition Alberta to a stable and sustainable revenue model.
The opportunity that these surpluses offer us is to take tangible steps to shape a fiscal future that is prosperous, stable, and most important, sustainable—and to do so from a place of financial strength and agency.