By Bruce Lantz
Alberta isn’t buying the Fraser Institute’s suggestion that it should revitalize its Heritage Fund and bring back its Sustainability Fund to help the province’s lagging economy.
The June report by the independent, non-partisan, Canadian public policy think tank, said Alberta’s rising debt load can be offset by establishing new constitutional rules requiring that a portion of resource industry revenues be saved. In the past, a savings account called the Sustainability Fund (eliminated in 2013) acquired a portion of resource revenues during peak periods, which the Fraser Institute says could be used to stabilize revenues during low periods. The report also recommended re-instituting the requirement that a portion of non-renewable resource revenues be deposited into the Heritage Fund.
“It’s time the Alberta government introduced rules to stabilize this volatile source of revenue and stop the boom-and-bust cycle in government finances,” Fraser Institute economist Tegan Hill said in a news release.
Over the past 50 years Alberta’s non-renewable resource revenue (adjusted for inflation) has ranged from $1.6 billion in 1970-71 to $19 billion in 2005-06. As a share of provincial revenue it has ranged from 77.4 per cent in 1979-80 to a projects 4.7 per cent in 2020-21 — the lowest on record. This volatility has fuelled instability in the provincial budget, particularly as the provincial government increased spending to “unsustainable levels” during periods of relatively high non-renewable resource revenue, the report said.
But the Alberta government says it won’t be following the Fraser Institute’s recommendations.
“At this point in time, the global economic recession, last year’s unprecedented drop in energy prices and the Covid-19 pandemic have combined to hit Alberta’s finances much harder than most other jurisdictions,” Kassandra Kitz, senior press secretary of the Alberta Treasury Board, told Resource World Magazine. She said the Sustainability Fund is already part of the Heritage Fund and does not need to be re-started.
“A rule about transferring non-renewable resource revenue to the (funds) rather than using it as general revenue would mean even more stress on other sources of revenue, such as taxes, on everyday Albertans. Any consideration of a new rule should take into account the possibility that it may lead future governments to fill the gap by raising taxes or borrowing more money to fund programs and services.”
A co-author of the Fraser Institute report said, however, that new rules based on past experience — and not easily undone by future governments — that establish a predictable level of non-renewable resource revenue for the province would a more stable economy for Alberta.
“(It) would help put an end to the boom-and-bust cycle in Alberta’s finances,” said Jason Clemens, the executive vice-president of the Fraser Institute.
But Katz said the Alberta government is committed to ensuring that overall spending is sustainable and has vowed to keep the ratio of net debt to GDP below 30%. She said Alberta’s overall debt level is low compared to most other provinces and it plans to balance its budget and repay its debt once the pandemic is over.
“Alberta’s government is committed, on an ongoing basis, to looking at the most prudent use of the Heritage Fund in order to maximize its benefit for all Albertans,” she said.