Oil revenues support Alberta’s surplus and fuel Smith’s benefits
Strong revenues from a rejuvenated energy sector will lead Alberta to a surplus of more than $12.3 billion this fiscal year, according to the province.
The figure was included in the second-quarter financial update released Thursday by Finance Minister Travis Toews.
The $12.3 surplus is down $900 million from the first quarter projection, but $11.8 billion more than projected in Alberta’s last budget.
And all in all, there is one thing to be thankful for.
Non-renewable resource revenues are expected to reach $28.1 billion in fiscal year 2022-23.
This is a record figure, far surpassing the previous record of $16.2 billion in 2021-22.
This follows oil prices in the US$100/barrel range during the Q1 update. The benchmark West Texas Intermediate has since softened, but remains strong at around US$80 a barrel.
Provincial projections put it at US$91.50 per barrel for 2022-2023: US$21.50 more than budgeted.
Personal and corporate income taxes also boosted provincial finances, with expected revenues of $13.3 billion and $6.3 billion, respectively.
But while the oil and gas industry has had an extremely profitable year, many Albertans cannot say the same.
Affordability remains a significant issue for millions of people, in part due to supply chain issues and global inflation.
Premier Danielle Smith announced a relief package on Tuesday that she says will help those in need.
The $2.4 billion pledge was amended in Thursday’s budget update to $2.8 billion.
The approximately additional $300 million is reserved for the 2024-2025 period and should take into account long-term changes in benefits and indexation of income.
But the majority of the relief announced earlier this week – including payments to families and seniors and a pause in collecting fuel taxes – is expected to be only temporary. Thursday’s update suggests the government will not introduce additional inflation relief measures.
The previously announced payments are expected to take effect in January.
The province says its total revenue currently stands at $76.9 billion and its expenditures are about $64.6 billion.
But in the next fiscal year, Albertans can expect to see some differences.
For starters, the province expects to cut spending by about $671 million in 2023-24.
Officials say services can be sustained even after inflation because gross rail spend is off the books.
There is another big change that will free up millions.
Spending related to COVID-19 has exceeded regular health spending in recent years.
A government official told CTV News that “in 2023-24 and 2024-25, as COVID transitions to an endemic state, costs will decrease.”
They say any continued financial impact of the pandemic will be assessed in the government’s next update.
RETHINK RAINY DAYS
Despite the energy windfall, payments to the Alberta Heritage Fund are drastically reduced.
The last budget provided for $2.4 billion to be paid into this fund. Now it looks like only $263 million will be – that’s down from $2.1 billion.
A lower than expected return on investment could be the cause.
A SURPLUS SURPLUS
The massive surplus, lower spending and backtracking of the Heritage Fund could give the province some spending wiggle room.
Its early plans are to pay down $13.4 billion in debt this fiscal year. This will reduce total taxpayer-funded debt to $79.8 billion.
But where the rest of the surplus goes is anyone’s guess.
And while energy prices aren’t expected to stay so high forever — the current estimate for the surplus for 2023-24 is $5.6 billion and $5.3 billion in 2024-25 — the financial outlook is still solid.
The province is expected to table a budget early next year.