Alberta budget projects $367M surplus but will borrow cash to meet obligations
Province plans to save $2B in Heritage Fund from this year’s surplus, but future deposits are unknown
The Alberta government is projecting ending the 2024-25 fiscal year with a $367 million accounting surplus meaning it still has to borrow money to meet its cash requirements.
In a news conference Thursday afternoon prior to the release of the budget, Finance Minister Nate Horner said the province plans to use $6.4 billion in surplus cash in the Alberta Fund both for savings and debt repayment.
Of that money, $2 billion is going to the Heritage Savings Trust Fund, $3.2 billion will pay maturing debt and $1.2 billion will be used for other debt repayment.
In a televised address last week, Premier Danielle Smith said the province will start saving money in the Heritage Fund so it can grow to at least $250 billion by 2050. The fund was set up in 1976.
The surplus in the current 2023-24 fiscal year was forecast at $5.2 million as of the end of December 2023.
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Horner said the province needs to save surpluses from good years and hold the line in years where things are more tight, such as the 2024-25 fiscal year.
The government will borrow $2.4 billion to fulfil budgetary requirements.
"We knew Budget 2024 was going to be more difficult," he said.
"That's why it's so important in the good years, in the years you have a surplus, that you spend it wisely, you don't increase your operation spending line because you're having a good year."
Under Alberta's fiscal framework, enacted a year ago, the province needs to use half of any surplus cash to pay off debt with the rest going to the new Alberta Fund created last year.
Horner chose to transfer $2 billion from the Alberta Fund to the Heritage Fund.
Electric vehicle tax
Alberta is planning to spend $73.2 billion in 2024-25, an increase of 3.9 per cent over last year and more than $2.2 billion more than forecasted in 2023-24.
Revenue is projected to be $73.5 billion. Taxpayer-supported debt is estimated to end 2024-25 at $78.4 billion with debt-servicing costs of $3.4 billion.
Tax revenue has increased by $1.7 billion this year. Personal tax will account for $15.6 billion of the overall amount, corporate tax revenue is estimated to be $7 billion.
The price of a barrel of West Texas Intermediate oil – the province's benchmark oil price – is estimated at $74 U.S. in the 2024-25 fiscal year.
Alberta still doesn't have a provincial sales tax but is introducing other types of tax revenue. The new Land Titles Registration Levy will cost an extra $5 per $5,000 worth of property.
Alberta is following Saskatchewan and many U.S. states by introducing an electric vehicle tax. Owners will pay $200 a year on top of their annual registration fees starting Jan. 1, 2025, to make up for the fuel taxes they don't pay. Fuel taxes account for the wear and tear on roads. Hybrid vehicles will be exempt.
The new eight per cent tax bracket for income under $60,000 will be phased in over two years starting in 2026.
Alberta NDP Opposition Leader Rachel Notley criticized Smith for delaying implementation of the lower tax, which was a promise the UCP leader made on the first day of the 2023 election campaign.
Notley said investment in the Heritage Fund is a way to distract Albertans from the missing tax cut.
"We didn't make that promise to Albertans. She did," Notley said.
"This whole moving around of a pretend surplus and a pretend investment into the Heritage Trust Fund, while creating a larger debt, it's showmanship to distract from a broken promise."
Watch | Reactions to Alberta budget:
Alberta is forecast to have a bad year for both drought and wildfires. The impact of last year's record-breaking wildfires cost $2.9 billion dollars and took up all of the $1.5 billion contingency fund.
Horner has bumped the fund to $2 billion for the upcoming season.
Other disaster spending includes $75 million over three years for the flood and drought mitigation plan, $55 million to upgrade wildfire fighting facilities and equipment, and $147 million to upgrade or fix water infrastructure.
Education, health care spending
The province is planning to spend about $26.2 billion on health care, which is a 4.4 per cent increase from the previous fiscal year. That includes $475 million for primary care, $200 million over two years on access to family doctors and $15 million on the new compensation model that would allow nurse practitioners to bill the province for treating patients.
The transfer of labs run by DynaLife back to the public system is costing the province about $31.5 million.
Alberta Health is spending $1 billion over three years in its overhaul of the continuing care system.
Education for K to 12 students is another big part of the provincial budget. The budget allocates $842 million over three years to address the pressures of the growth in enrolment. Last year, the system accommodated 28,000 new students.
Another $2.1 billion is going toward the construction and expansion of new and existing schools and about $103 million of that amount will pay for modular classrooms to take some pressure off crowded schools.
On the affordable housing file, $405 million is set aside for the Affordable Housing Partnership Program, which brings together non-profits, private companies and government to build affordable housing. Another $91 million is allocated for repairs to government-owned social housing. The Indigenous Housing Capital Program will receive $75 million in funding.
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