Oil revenues, taxes nudge up Alberta's projected surplus to $5.5B

Higher-than expected revenue from income taxes and non-renewable resource revenues are bumping Alberta's expected surplus up to $5.5 billion this year.

Despite a rosy short-term outlook in the second-quarter fiscal update released Thursday, Finance Minister Nate Horner says he wants to prepare for years when the province's coffers are more sparse.

"There's pressures that I see that keep me up at night," Horner told reporters.

Maturing debt will have to be refinanced at higher borrowing rates, he said. And the bulk of Alberta's unionized public employees have contracts expiring next year.

These were some of the considerations when the government decided to end the complete waiver of the provincial fuel tax as of Jan. 1, 2024, he said.

One of the United Conservative Party government's key election commitments was absent from the financial forecast.

During the spring election campaign, the party pledged to create a new eight-per-cent tax bracket on income under $60,000, a move the government said would save Albertans up to $750 annually.

The party's costed platform, released on May 24, estimated the new tax bracket would cost the treasury about $262 million this fiscal year, and more than $1 billion per year thereafter.

The pledge is in October's throne speech and Horner's mandate letter from the premier. The government has yet to table legislation to create the tax bracket.

Horner said Thursday he doesn't know when it's coming or what tax year the new bracket will take effect.

Also missing from the update was the cost of the government's about-face on privatizing community lab testing across the province.

Responding to outcry about weeks-long waits for routine blood work, the province signed a deal in August for provincially owned Alberta Precision Labs (APL) to take over the operations of Dynalife by the end of this calendar year.

Health Minister Adriana LaGrange told reporters on Thursday that APL is in the process of acquiring staff and infrastructure from Dynalife.

The province also paid for extra public lab services to fill the gaps in Dynalife's service, she said. LaGrange said she hopes to know the total transition cost by early spring 2024.

Oil, in-migration buoy balance sheet

Rebounding oil prices, a narrower-than-expected gap between the price of Canadian oil and the U.S. benchmark, and one extra project paying oil royalties at a higher rate are all increasing Alberta's projected revenue by $3.7 billion over what was predicted in February's budget.

The second-quarter update shows planned expenses for the year are up 0.7 per cent, and include additional spending on health care, education, advanced education and mental health and addiction.

A new law this year that sets new rules for how the government must manage its finances requires leaders to dedicate half of any surplus to paying down debt.

That would send $3.2 billion to debt payments this year, leaving Alberta with $76.1 billion in taxpayer-supported debt by fiscal year's end.

Another $1.6 billion in surplus will flow into the Alberta Fund, a new savings account the government also created this year.

Horner said a full fiscal year must elapse before the government makes any decisions about if and how to spend money in the Alberta Fund. Horner said he'd prefer to use it to pay down debt, but thinks he'd be "outvoted" by cabinet colleagues.

An extraordinary wildfire season and punishing drought that hammered livestock producers also prompted the government to spend most of its $1.5-billion disaster contingency fund in the first six months of the fiscal year.

Although the full provincial fuel tax holiday will end on Dec. 31, a program to provide relief at the pumps based on the price of the benchmark West Texas Intermediate oil will continue. Provincial tax discounts will rise along with oil prices.

NDP MLA Samir Kayande, the Opposition critic for finance and fiscal responsibility, said the public is not enjoying the same financial comfort as the government's books.

He criticized the government for failing to bring down electricity prices or retain and build more affordable housing. A government that is encouraging in-migration should be taking more measures to moderate housing costs, he said.

Kayande was surprised Horner said the creation of a new low-income tax bracket isn't imminent.

"Already we've got the government backtracking on one of its significant promises," he said.