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The Alberta government says it ended fiscal 2021-2022 with a $3.9-billion surplus.AMBER BRACKEN/The Canadian Press

Alberta posted a multi-billion-dollar surplus in the last fiscal year after a record windfall of energy revenue erased a forecasted deficit that motivated the government to cut spending.

The government on Tuesday said it ended fiscal 2021-2022 with a $3.9-billion surplus, compared to the $18.2-billion shortfall it predicted when it released the budget in February, 2021. While the United Conservative Party said its financial choices deserve some credit for Alberta’s first surplus since 2015, the largest factor was the shift in global oil and gas prices, which translated into $16.1-billion in royalty revenues for the province.

Jason Nixon, who was promoted to Finance Minister after Travis Toews left cabinet to run for the leadership of the UCP, said Alberta will not go on a spending spree in light of the influx in cash. The province, he said, will continue to review ways to alleviate consumer costs caused by inflation, but the UCP is worried too much government assistance may backfire. Mr. Nixon said Alberta must first assess how its current “affordability measures,” such as the forthcoming $150 electricity rebates, affect inflation before taking more action.

“We have to take our time,” he said. “We need to recognize that if we go too far with this, we could actually make the situation worse even though we are trying to help.”

He attributed some of today’s inflation to the “tremendous amount of money coming in from [the] federal government” as Ottawa spends on COVID-19 programs and tries to offset rising costs.

Alberta said it collected $16.1-billion in resource revenue in 2021-2022, compared to its budget estimate of $2.8-billion. This haul bested Alberta’s previous record from non-renewable resources of $14.3-billion, set in 2005-2006. The government also noted $2-billion of its newly calculated surplus is owing to changes to the Sturgeon Refinery contract.

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Alberta’s 2021-2022 budget was predicated on West Texas Intermediate oil, the North American benchmark, trading at an average of US$46 per barrel. By fiscal year’s end, WTI averaged US$77 per barrel, the fiscal update calculated. Five oil-sands projects reached payout in 2021, increasing their royalty rates.

The 2022-2023 budget will benefit from the same math. In February, the government’s budget called for a surplus of $511-million, based on WTI averaging US$70 per barrel in the fiscal year, and Russia’s invasion of Ukraine has kept the price well above this mark. For every $1 over its WTI assumption, the government expects to collect an additional $500-million.

Alberta will have a better idea of its fiscal position in August, when it calculates its first-quarter update for the current fiscal year. That, Mr. Nixon said, will give cabinet the information it needs to debate what to do with the gusher of royalty revenue and further “affordability measures.”

However, Mr. Nixon warned Alberta must not repeat the mistakes of its past – draining its bank accounts in good years, only to suffer when the energy markets sour. The government, he said, will focus on beefing up the Alberta Heritage Savings Trust Fund, repaying debt, and assisting residents with inflation. Alberta must not revert to paying more for services than comparative provinces, Mr. Nixon said.

Lindsay Tedds, the scientific director of fiscal and economic policy at the School of Public Policy at the University of Calgary, said the UCP’s tepid approach to spending is warranted. Resource revenue is unstable and should not underpin long-term spending plans.

However, the economist believes Alberta could reverse some of its earlier policies, such as de-indexing the Assured Income for the Severely Handicapped payments, Alberta Child and Family Benefit, tax credits and tax thresholds. The government, Prof. Tedds said, could re-index such programs and make participants whole, quickly addressing affordability without burning through the revenue windfall.

The province spent $64.3-billion in 2021-2022, compared to its original estimate of $61.9-billion. It spent more than planned on health programs, while education and social services came in below budget, according to the fiscal update.

Alberta in April suspended its 13-cent-a-litre tax on gasoline and diesel, in light of high fuel costs for consumers and the river of energy royalties flowing into government coffers. The province also promised $150 in electricity rebates for roughly one million homes, farms and businesses, which are expected to start in July; and natural gas rebates are teed up for October.

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