Alberta budget back in the black as oil prices drive $500M surplus

Alberta uveiled its 2022 budget on Feb. 24, 2022 (THE CANADIAN PRESS/Adrian Wyld)

Alberta’s new budget revealed on Thursday balances the province’s books for just the second time since 2007-08 as high oil prices and reduced spending return the province’s finances into the black.

The provincial deficit, estimated as recently as November to be around $5.8 billion, is now eliminated.

The province is now reporting a $500 million surplus for the upcoming fiscal year, and surpluses of $900 million and $700 million projected for the two years to come.

“Alberta is moving forward once again,” said Finance Minister Travis Toews. “Budget 2022 makes targeted investments to give Albertans the tools we need to move forward toward a prosperous and sustainable future.”

The last time the province’s books were balanced was in 2014-15.

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Alberta’s debt will hit $97.7 billion by March 31, about $18 billion lower than projected, and is expected to shrink by a further $3 billion by the end of the next fiscal year.

Debt servicing costs are tabbed at $2.7 billion for the next year.

Expenses for the next fiscal year will hit $62.1 billion, or $2.8 billion less than forecast. That figure is expected to grow by only $1.1 billion through 2025.

The new fiscal blueprint counts on a return of jobs, wages and consumer confidence in a post-pandemic future while also stressing creating health system capacity, job creation and education spending.

“We will continue to responsibly manage our costs in the delivery of programs and services,” Toews said.

Opposition leader Rachel Notley characterized the new budget as one that was "high on oil prices and low on support for families and business." 

"The premier may be celebrating but Alberta families are not back in black," the NDP leader said. 

"This budget should have been an opportunity for our province to begin healing the scars of the pandemic."

PRICE OF OIL

The government’s throne speech, delivered on Tuesday, cited “a dramatic improvement in Alberta’s finances,” driven in large part by oil prices that are significantly higher than projected, resulting in a $10 billion bump in revenue.

As of last Friday, the price of West Texas Intermediate was up 73 per cent over the last year, and the price of Western Canadian Select boomed to more than 105 per cent over last year.

WTI was priced at US$96 at the end of last week, more than double the government’s estimate of US$46 outlined in Budget 2021.

Budget documents do note, however, that prices remain volatile, with “commodity prices and investment income are expected to moderate” in coming years.

Tax revenue is forecast to be the largest source of revenue in the years ahead.

The budget estimates the price of WTI as US$70 for 2022-23, with the price decreasing to US$66.50 by the end of the 2025 fiscal year.

Independent of oil prices, the government is counting on consumer spending as well as through personal income and corporate taxes, the latter of which it expects to grow by 21 per cent in the fiscal year to come.

MacEwan University political scientist Chaldeans Mensah says it all adds up to a "significant" improvement in the province's revenue picture. 

"This budget has delivered good news for the province," he said, noting the "remarkable improvement" in oil prices but also cautioning the recent Russian invasion of Ukraine could affect global markets. 

He also cautioned that the ongoing COVID-19 pandemic could yet affect the province's finances. 

"This pandemic has a habit of throwing in unforseen circumstances," he said. 

"If we some sort of bad news on the pandemic side that could also really hamper the economic picture for Alberta."

HEALTH SYSTEM CAPACITY

The government claims its new budget permanently boosts health system capacity, including a plan to increase the number of surgeries performed at charter facilities from 15 per cent of the total up to 30 per cent in the coming years.

Earlier this week, Premier Jason Kenney said the plan was, “one way of getting more surgeries done more efficiently and more quickly to reduce surgical wait times.”

Alberta’s health ministry will see $1.8 billion in operating expenses added to the total health-care budget by 2024-25, with $600 million of that expected this fiscal year.

Alberta Health Services, the province’s medical care provider, will see its budget grow by 3.3 per cent, up to nearly $15.1 billion.

The government is also targeting $100 million in funding to annually go toward targeted initiatives including new intensive care unit beds and training staff needed to operate them.

The government says the unspecified number of ICU beds would be spread across all five AHS health zones.

“I'm looking forward to working with everyone in the system to recover from the pandemic and build a health system that's better than ever,” said Health Minister Jason Copping.

There's also $750 million devoted toward a COVID-19 contingency this year, which will help address the surgical backlog and ensure the province can cover evolving pandemic-related costs.

NATURAL GAS REBATE

While higher than anticipated oil prices are in large part behind the province’s sudden surplus, they are also taking a toll, along with inflation, on Albertans’ finances in the forms of high fuel, natural gas and electricity prices.

To address that, the province is creating what it terms “an energy consumer protection program” that will go into effect on Oct. 1 and run until the end of March 2023.

The plan would grant a rebate to consumers who use fewer than 2,500 gigajoules annually if the rates rise about $6.50 per gigajoule, though natural gas rates in last December and January are well below that.

Notley called the threshold "a rate their own budget says they'll never reach." 

"For both gas and electricty Albertans are on their own this winter and very likely they'll be on their own next winter."

EDUCATION

The budget outlines a one per cent increase to the education base funding rate that will apply to all school authorities, not just the public education systems.

The budget also emphasizes the government’s plan to introduce a new curriculum, with $191 million devoted over the next three years toward implementing the new educational framework.

“Implementation of the draft K-6 curriculum will be supported by a significant investment in resources and teacher training. The new curriculum will better prepare our youth for the jobs of tomorrow,” said Education Minister Adriana LaGrange.

Education appears poised to also play a key role in the province’s jobs program, Alberta at Work, that aims to, “bring together new and existing programs to build Albertans’ skills to meet current and future labour market demands.”

It includes 7,000 additional spots for areas including technology, aviation, healthcare, finance and energy.

The province’s capital plan also calls for funding of $1.5 billion for school projects, including 15 projects for the construction of new schools, modernizations and design work to support school building priorities. 

The government says details on the locations of those projects will be revealed in the coming days.