“Prior to the end of this year, our government will publicly release a long-term financial plan charting a path to a Heritage Fund of between $250 and $400 billion dollars by the year 2050.”Of all the goals Premier Smith might have set for her government in a state of the province address, that of dramatically expanding the Heritage Savings Trust Fund is at once the most consequential and the most difficult.It is consequential in that properly nurtured and consistently supplemented, it would indeed release Alberta from the whipsaw financing and interest payments that is the sure consequence of resource revenue reliance. All just as Smith asserts.It would therefore be ‘A Good Thing,’ and in jurisdictions where it has been successfully accomplished — Norway, for example — the benefits are well documented. (The Norwegian sovereign wealth fund is the world’s largest.) Closer to home in Alaska, where the state-owned Alaska Permanent Fund has stewarded the state’s resource revenues since 1976, citizens receive an annual dividend: In 2023, it was $1,312.So it can be done. And while Smith makes no mention of citizen dividends — a sparse population and immense wealth are Alaska’s unique advantages — it can be done very well.What then, could possibly go wrong?Well, everything that has already gone wrong since Premier Peter Lougheed set up the Alberta Heritage Fund — also in 1976 — and which makes it the most difficult goal.Here are three things that Smith will face.First, for years when interest from the Heritage Fund was in the billion dollars a year range, it was routinely diverted to General Revenue, which kept the fund languishing in the mid-teens where inflation made it look less and less impressive as the years went by.Sadly, that temptation to pay off a favoured interest group while still balancing the budget will never go away. Indeed, as the fund grows and with it the earnings, this is a temptation that will merely become stronger. As in, ‘Come on, who’d miss a few hundred million for this very worthy priority that isn’t quite worthy enough to come out of general revenue but which our key supporters would really like?’Second, there was during the early years of this century, a not-entirely irrational fear that there was no point in Alberta building up a nest egg, because Ottawa would just find a way to steal it.This became less persuasive after 2006, when Harper’s Conservatives replaced the Liberals after the latters’ 13-year occupation of office. However, quite serious people said that out loud at the time and the wretched contumely poured out by the prime minister upon Premier Smith today, will deservedly validate the fears of their successors. After all, federal policy from decades before Justin Trudeau was born has been aimed at keeping the provinces in a state of dependency upon the federal government. (See economist Tom Courchene’s explanation in this piece, here.)Mr. Trudeau, after all, is the same prime minister who is pledged to phasing out the oilsands. How he would feel about Alberta as a petro-state within Confederation, is better imagined than described.Third, there is the demonstrated incompetence of Alberta politicians over a period of nearly 50 years. It is a standing indictment of the Progressive Conservative Party of Alberta and the Alberta NDP that despite being debt-free in 2010, and having in addition a so-called ‘rainy day fund’ to stabilize revenues and expenditures in lean years, Alberta’s politicians of both parties managed to burn through $132 billion in resource revenues between 2010 and 2023 alone and pay during that time more than $21 billion in interest.This, during a prolonged period of low interest. We are now in a high-interest regime. Those with an appetite for detail may review Alberta’s Historical Fiscal Summary. And weep.Clearly, nobody knew how to say ‘no.’It is this weakness of the flesh in Alberta that now explains why Alaska’s Permanent Fund is valued at $77 billion, Norway’s Pension Fund Global (established in 1990) at a whopping US$1.5 trillion, while Alberta’s remains a mere $21.2 billion.Can Smith’s bold goal be achieved?Possibly. It is possible to conceive of Smith herself maintaining a Thatcher-esque commitment to what has for her been a life-goal since her days on the Calgary Herald editorial board. However, unless she plans to be premier forever, her successors must be as committed as she is.Should it be attempted?Absolutely. What Alberta politicians have done for 50 years is like farmers selling their topsoil. What happens when there’s nothing more to sell?Let us leave that as a rhetorical question. As Smith said this evening, Alberta has “one last shot at getting this right.”Albertans should take it. And then, stay the course.It is a better way to live.
“Prior to the end of this year, our government will publicly release a long-term financial plan charting a path to a Heritage Fund of between $250 and $400 billion dollars by the year 2050.”Of all the goals Premier Smith might have set for her government in a state of the province address, that of dramatically expanding the Heritage Savings Trust Fund is at once the most consequential and the most difficult.It is consequential in that properly nurtured and consistently supplemented, it would indeed release Alberta from the whipsaw financing and interest payments that is the sure consequence of resource revenue reliance. All just as Smith asserts.It would therefore be ‘A Good Thing,’ and in jurisdictions where it has been successfully accomplished — Norway, for example — the benefits are well documented. (The Norwegian sovereign wealth fund is the world’s largest.) Closer to home in Alaska, where the state-owned Alaska Permanent Fund has stewarded the state’s resource revenues since 1976, citizens receive an annual dividend: In 2023, it was $1,312.So it can be done. And while Smith makes no mention of citizen dividends — a sparse population and immense wealth are Alaska’s unique advantages — it can be done very well.What then, could possibly go wrong?Well, everything that has already gone wrong since Premier Peter Lougheed set up the Alberta Heritage Fund — also in 1976 — and which makes it the most difficult goal.Here are three things that Smith will face.First, for years when interest from the Heritage Fund was in the billion dollars a year range, it was routinely diverted to General Revenue, which kept the fund languishing in the mid-teens where inflation made it look less and less impressive as the years went by.Sadly, that temptation to pay off a favoured interest group while still balancing the budget will never go away. Indeed, as the fund grows and with it the earnings, this is a temptation that will merely become stronger. As in, ‘Come on, who’d miss a few hundred million for this very worthy priority that isn’t quite worthy enough to come out of general revenue but which our key supporters would really like?’Second, there was during the early years of this century, a not-entirely irrational fear that there was no point in Alberta building up a nest egg, because Ottawa would just find a way to steal it.This became less persuasive after 2006, when Harper’s Conservatives replaced the Liberals after the latters’ 13-year occupation of office. However, quite serious people said that out loud at the time and the wretched contumely poured out by the prime minister upon Premier Smith today, will deservedly validate the fears of their successors. After all, federal policy from decades before Justin Trudeau was born has been aimed at keeping the provinces in a state of dependency upon the federal government. (See economist Tom Courchene’s explanation in this piece, here.)Mr. Trudeau, after all, is the same prime minister who is pledged to phasing out the oilsands. How he would feel about Alberta as a petro-state within Confederation, is better imagined than described.Third, there is the demonstrated incompetence of Alberta politicians over a period of nearly 50 years. It is a standing indictment of the Progressive Conservative Party of Alberta and the Alberta NDP that despite being debt-free in 2010, and having in addition a so-called ‘rainy day fund’ to stabilize revenues and expenditures in lean years, Alberta’s politicians of both parties managed to burn through $132 billion in resource revenues between 2010 and 2023 alone and pay during that time more than $21 billion in interest.This, during a prolonged period of low interest. We are now in a high-interest regime. Those with an appetite for detail may review Alberta’s Historical Fiscal Summary. And weep.Clearly, nobody knew how to say ‘no.’It is this weakness of the flesh in Alberta that now explains why Alaska’s Permanent Fund is valued at $77 billion, Norway’s Pension Fund Global (established in 1990) at a whopping US$1.5 trillion, while Alberta’s remains a mere $21.2 billion.Can Smith’s bold goal be achieved?Possibly. It is possible to conceive of Smith herself maintaining a Thatcher-esque commitment to what has for her been a life-goal since her days on the Calgary Herald editorial board. However, unless she plans to be premier forever, her successors must be as committed as she is.Should it be attempted?Absolutely. What Alberta politicians have done for 50 years is like farmers selling their topsoil. What happens when there’s nothing more to sell?Let us leave that as a rhetorical question. As Smith said this evening, Alberta has “one last shot at getting this right.”Albertans should take it. And then, stay the course.It is a better way to live.
