Record resource revenues send budget into black
Higher-than-expected tax revenue also contributes to $3.9B surplus
Record high resource revenues led to a balanced Alberta budget in 2021-22, the first since 2014-15.
Alberta ended the fiscal year with a surplus of $3.9 billion, president of the Treasury Board and Finance Minister Jason Nixon said on Tuesday as he released the fourth-quarter results of the last fiscal year.
In February 2021, the government forecast an $18.2-billion deficit for the year.
By the end of March 2022, however, while expenses were $2.5 billion higher than expected, the province's revenue jumped by nearly $25 billion over what analysts had predicted, largely due to rising oil prices.
The total non-renewable resource revenue for the year was $16.1 billion — an increase of $13.3 billion over what was expected.
Previously, the highest amount of resource revenue reported by the province was in the 2005-06 fiscal year when that number hit $14.3 billion.
Leading up to last year's budget, West Texas Intermediate ( WTI) crude was trading between US$40 and US$50 per barrel.
The province based the budget on an average WTI price of US$46 per barrel.
Instead, the average price in 2021-22 was US$77 per barrel. The price climbed, particularly in early February 2022 when Russia invaded Ukraine, and by April 1, 2022, the price of oil was US$101.78 per barrel.
The government collected $4.4 billion more in taxes than was expected in the original budget and changes to the contract and ownership structure of the Sturgeon Refinery added another $2 billion to provincial coffers.
The unprecedented financial turnaround comes as Albertans continue to face a rising cost of living.
On Tuesday, Nixon said the surplus would be spent on things like beefing up the Heritage Trust Fund and paying down the debt.
He said the government has also spent money to make life more affordable including by suspending the gas tax and through a promised energy rebate which was included as part of this fiscal report but is not expected to reach Albertans' pockets until next month.
Previous conservative and NDP governments have spent resource revenue as soon as these kinds of windfalls arrive, he said, creating issues for the future.
“One thing that this oil and gas revenue shift shows is how volatile the world is and how little (we) as a subnational government can control that situation,” Nixon said.
“So I think it's incumbent upon us at the moment to make sure that we strategically use these resources to help Albertans through those issues right now, particularly around inflation and affordability, but do it in such a way that we don't create problems for future governments when those oil and gas prices come back down.”
For its part, the NDP Opposition says the government needs to do more to help Alberta families that are struggling, particularly as inflation outpaces wage growth.
Businesses, as well as the health care and education systems, are struggling under the current government, Leader Rachel Notley said Tuesday.
Notley said the Opposition would be releasing its own plan outlining the principles it would use to manage the surplus in the coming weeks.
She mentioned the need to re-index personal income tax to inflation as well as re-indexing various income support programs — both of which were ended by the UCP government.
“The fact of the matter is that we've got an inflationary challenge that impacts low- and middle-income families far more than an impact on higher income families,” Notley said.
“And it is time for this government to step up and have the backs of the vast majority of Albertans who need someone in their corner.”
Nixon said the government has worked to bring the cost of services in line with that of other provinces, though Notley has accused him of cherry-picking his data.
“As the government has brought its fiscal house in order, and brought our spending for the same services in line with other provinces, that creates opportunities for us to use our resources in more productive ways for Albertans,” Nixon said.
On the expense side of the ledger, the increased costs incurred by the province were due largely to an extra $2.3 billion in disaster assistance that was distributed mainly for agriculture businesses in the form of crop insurance indemnities and livestock feed assistance following the severe drought in 2021.
Total taxpayer-supported debt at the end of 2021-22 was $93.1 billion. The province paid down the provincial debt by $1.3 billion and taxpayer-supported debt servicing costs were $2.28 billion, down $45 million from the third-quarter forecast.
The market value of the Heritage Savings Trust Fund sat at $20 billion.
Nixon said the government will be bringing forward legislation in the fall so that more earnings from the trust fund can be invested back into it. Currently that amount is capped at the consumer price index.