Don’t blow the boom

By Kris Sims

Counting on another oil boom to balance Alberta’s future budgets is like counting on winning the lottery to pay your mortgage.

Being able to write a budget shopping list with a $12.3 billion surplus is a fortunate blessing bestowed by Alberta’s natural resources.

We need a plan so we don’t “piss it away again,” as the famous bumper sticker says.

Premier Danielle Smith’s government is smart to focus on balanced budgets, paying down debt, limiting spending hikes and saving for the future.

Alberta’s Budget 2023-24 is an election budget and it has boosted spending in vote-shiny areas such as healthcare and education. More spending from a provincial government with a track record of splurging should give us pause, but there’s lots for taxpayers to be happy about in this year’s budget.

Alberta doesn’t have a provincial fuel tax right now and that saves taxpayers 13 cents per litre of diesel and gasoline. That means we save about $15 every time we fill up our pickup trucks.

The Smith government has also scrapped bracket creep, which will save taxpayers about $300 apiece in income taxes. Bracket creep happens when we automatically get knocked into higher tax brackets with a cost-of-living pay raise even though we’re no further ahead. Indexing tax brackets to inflation means no more sneaky tax hikes.

The Smith government is also going to make balanced budgets the law of the land. That means the government will need to balance the budget unless there’s a big emergency. What counts as a big emergency? Likely the price of oil bottoming out or aliens landing in Lacombe, but the fine print will surface when the new law is tabled in the legislature.

The debt is back on the radar too. When Alberta has a surplus, at least half of the cash will be earmarked for the debt. The rest has to go to more debt repayment, put into the Heritage Fund or be used for one-time spending.

Back in 1999, then-premier Ralph Klein vowed to use 75 per cent of the surplus toward paying down the debt. That rule kept his government from blowing the surplus each year and made Alberta debt free. Following Klein’s lead is a strong showing that the Smith government is committed to debt repayment too.

In 2021, the provincial debt was $93 billion. After a big payment last year, the debt is now down to approximately $78.3 billion.  But there will still be some pain. With a lot of debt and rising interest rates, taxpayers are still paying the price, to the tune of $2.8 billion in debt interest costs per year. Previous mismanagement costs taxpayers today.

The Alberta government has also promised to limit operating spending increases to inflation plus population growth. The Canadian Taxpayers Federation has been pushing for this kind of spending restraint since the 1990s, because it mirrors the common-sense approach to spending that many households use.

The government is also promising to prioritize saving for the future.

Right now, Alberta has about $18.6 billion in the Heritage Fund. Smith announced $2 billion is being added into it because of the surpluses of the past two years.

If Alberta had saved money like Alaska has with its natural resource revenue Permanent Fund, Alberta would have more than $234 billion saved in it by now. That would translate into paying out dividends of about $1,018 per Albertan per year, according to the Fraser Institute.

This budget doesn’t hit the brakes on spending, so Smith must be careful to detour away from wasteful spending habits practised by previous governments. The guardrails in this budget are a good start and they could protect taxpayers for years to come.

With promises of balanced budgets, strict spending rules, paying down the debt and saving for the future, the Smith government deserves a thumbs-up for this year’s budget.

Kris Sims is the Alberta Director for the Canadian Taxpayers Federation.