Alberta forecasts $13-billion surplus this year and slashes debt

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Alberta is cheerfully tearing up financial estimates that had previously pegged the province’s budget surplus for this year at $511 million as soaring energy prices and resource revenues have catapulted the province to forecast a $13.2-billion windfall for 2022-23, according to the latest fiscal update.

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The flood in resource revenues has prompted the province’s United Conservative Party government to announce a massive $13.4-billion payment on Alberta’s debt this year, bringing the total down to $79.8 billion by early next year. Currently, the provincial debt sits at $93.1 billion.

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“For too long, governments in Alberta refused to exercise fiscal discipline during boom times,” said Finance Minister Jason Nixon in a release Wednesday. “Those days are over. Alberta’s government is making the prudent decision to save and invest surplus revenues so future generations can benefit from the prosperity of today.”

The dramatic reversal in fortune is the result of Alberta’s longstanding vulnerability to oil price volatility. The province is just beginning to claw its way out of a fiscal hole created by years of deficit budgets, compounded by a protracted downturn in the oilpatch and the COVID-19 pandemic. Last year’s fiscal surplus was the province’s first since 2014-15.

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Non-renewable resource revenue is forecasted to reach $28.4 billion this year — by far the largest amount the province has ever reported.

The surplus has meant the government will resume the practice of indexing its income tax brackets to inflation. A move that’s estimated to save the average Albertan about $300 this year.

The province is also providing a $2.9-billion boost to the Alberta Heritage Fund, which was established under the former government of Premier Peter Lougheed to ensure a portion of Alberta’s oil and gas royalties were set aside each year. In recent economic downturns, though, the value of the fund dipped as contributions were diverted to bolster general revenues.

Original budget estimates were based on an average West Texas Intermediate (WTI) price of US$70 per barrel. However, WTI has averaged more than US$100 per barrel over the first six months of the year.

More to come…

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