Alberta Premier Danielle Smith said it is unsustainable for the government to rely on resource revenues to fund its budget, so she will be putting money into the Heritage Fund to try to get it to $400 billion. “Some say the answer is higher income taxes or a sales tax,” said Smith in a Wednesday speech on various broadcasters. “I reject this.” If people look at other Canadian provinces and American states, Smith said they will see increasing these taxes to balance a budget is a recipe for economic decline. She acknowledged she would be proposing an alternative solution. Former Alberta premier Peter Lougheed created the Heritage Fund. The purpose of the Heritage Fund was to allocate a portion of Alberta’s non-renewable resource royalties each year to it so the interest would grow large enough to eliminate its reliance on them when they declined. When Lougheed adopted this vision, she said it was ahead of its time. She pointed out several oil- and gas-producing countries around the world have adopted a similar strategy and boast sovereign wealth funds large enough to eliminate their reliance on resource revenues. If the Alberta government had reinvested some of the income earned in the Heritage Fund from Lougheed’s initial deposits of $12 billion in the late 1970s and early 1980s, it would be worth more than $250 billion today, earning between $12 and $25 billion per year in revenue. This means it would be earning enough interest today to make it unreliant on resource revenues. For a variety of reasons, the Alberta government did not do this. Of course, she said now is not the time to bemoan what might have been. In her view, she said the time “has come to act decisively and end any further procrastination.” Last year, the Alberta government passed a law mandating all income earned in the Heritage Fund be reinvested in it rather than spent. During the current budget year, the Alberta government will put $3 billion of surplus money and interest back into the Heritage Fund to increase its value to almost $25 billion — up from $17 billion a few years ago. Smith has instructed her finance minister to limit government spending to below the legislated rate cap of inflation plus population growth during lean years with lower oil prices and in years when high oil and natural gas prices result in billions of surplus funds. Instead of spending non-renewable surplus cash on the wants of today, she said it will exercise fiscal discipline, spend money on the Heritage Fund, pay down debt and stop relying on resource revenues. In her view, she said Alberta has one last shot at getting this right. However, the world has several decades left in the global energy transition where countries will need its oil and gas resources. Despite this coming year’s predicted global economic slowdown, she said she believes Alberta is on the cusp of a major energy resource boom — one that will include hundreds of billions in investments and tens of thousands of new jobs. She added it “is going to be an exciting time for our province and for Canada, especially once we finally get a federal government that acts like a strategic partner rather than a delusional adversary.” Prior to the end of this year, the Alberta government will release a long-term financial plan charting a path to a Heritage Fund of between $250 and $400 billion by 2050. At the moment, 2050 is its target for a carbon-neutral economy.
