Skip to main content

EMS prepare their ambulances at the U of A Hospital in Edmonton May 7.JASON FRANSON/The Globe and Mail

Alberta, which recently confirmed that it collected a record amount of energy royalties in the past fiscal year, is facing a welcome financial conundrum: how to manage the river of cash surging into the province’s bank account.

Finance Minister Jason Nixon said last week that Alberta will refrain from handing out its windfall, cautioning against spending plans based on volatile energy royalties. But the United Conservative Party, which tightened budgets as it forecasted years of deficits, is under pressure to loosen the purse strings in light of the province’s dramatic swing into black.

Edmonton wants the province to help ease the homelessness situation in the capital. The mayor of Calgary wants a slice of the surprise surplus, noting that the city’s fire department is in need of money, in part because it is increasingly responding to medical calls without compensation from the province. Rural Municipalities of Alberta and Alberta Municipalities, two lobby groups, want the provincial government to reverse recent cuts to grants crucial to local budgets.

The province released its year-end accounting for 2021-22, revealing that Alberta posted a $3.9-billion surplus, compared with a budgeted shortfall of $18.2-billion.

Cathy Heron, the mayor of St. Albert and president of Alberta Municipalities, said that while Mr. Nixon wants to save for future generations, some of the benefits should be passed on to today’s residents through spending on programs such as social housing, mental-health assistance and job-creating efforts. She emphasized the importance of infrastructure, noting those types of spending projects also stoke employment.

Alberta earmarked $485-million in capital funding under its Municipal Sustainability Initiative for fiscal 2022, as well as 2023, compared with $1.2-billion in 2021. Municipalities use these grants to build roads, parks, wastewater systems and other projects in their communities. Municipal politicians want their provincial counterparts to reinstate funding for the MSI, which will be replaced with the Local Government Fiscal Framework in 2024.

“We really would be extremely overjoyed if it just returned to what it used to be,” Ms. Heron said.

Paul McLauchlin, the reeve of Ponoka County and president of the Rural Municipalities of Alberta, echoed the call for the province to replenish the MSI.

“We need to be made whole,” he said.

Mr. Nixon said the government plans to sock away the excess cash in the Alberta Heritage Savings Trust Fund, repay debt, and will consider programs to offset inflation costs. He cautioned against the lure of spending the windfall, noting royalty revenues can quickly plummet.

Trevor Tombe, an economist at the University of Calgary, estimated Alberta’s monthly revenue now exceeds the province’s budgeted intake by between $1-billion and $1.5-billion. Alberta, in February, forecasted a surplus of $511-million in 2022-23, although the government last week noted that the province’s fortunes have since changed for the better. Alberta will provide a first-quarter update in August.

Prof. Tombe said the flood of cash gives Alberta a chance to convert physical assets – oil and gas – into financial assets that could generate returns for years to come.

“Save every penny of it,” he advised. It would be more beneficial, he said, to save the cash and instead fund programs with borrowed money. “It is cheaper to pay interest on the debt than forgoing the higher returns that we can expect from investments in the Heritage [fund].”

The UCP is slated to select a new leader in October and Alberta’s next general election is scheduled for May, 2023.

Susan Slade, a vice-president with the Alberta Union of Provincial Employees, said the UCP made budget cuts under the guise of slaying the deficit. “They cut health care, government services, education. So surely with this big surplus, you would think they would reverse all that.”

We have a weekly Western Canada newsletter written by our B.C. and Alberta bureau chiefs, providing a comprehensive package of the news you need to know about the region and its place in the issues facing Canada. Sign up today.