Drumheller-Stettler MLA and provincial finance minister Nate Horner provided the province with a quarterly fiscal update to close August.
According to Horner, the province is set for a $2.4 billion surplus as of the end of the first fiscal quarter.
“Alberta’s finances remain strong, and thanks to our new fiscal framework, Alberta’s fiscal position is poised to become even stronger,” said Horner, in a media release.
Under Alberta legislation, at least half of the surplus must be directed toward paying down the provincial debt, which will reduce debt-servicing fees by around $120 million in the following years. Due to interest rates, debt servicing costs for the province currently account for around $3 billion worth of the provincial budget.
The projected surplus comes despite higher-than-normal costs associated with fighting the provincial wildfires, the volatile energy sector and the ongoing pause on fuel tax collection.
According to Horner, the economic outlook remains strong for two main reasons: first, the falling inflation rate and increasing Gross Domestic Product (GDP), which is leading to an increase in jobs, and second, net population growth.
Based on first-quarter projections, Alberta’s GDP is set to remain around three per cent during the 2023-24 fiscal year while inflation is anticipated to hold around 3.1 per cent before dropping to an anticipated 2.2 per cent in 2024, slightly above the Bank of Canada’s goal of two per cent.
As far as population growth, the province is anticipating a growth of around 4.4 per cent, with around 46,000 people coming from the rest of Canada along side a significant number of non-permanent residents fleeing war in Ukraine or temporary foreign workers.
In factoring anticipated oil royalty revenues, the Ministry of Finance has dropped the forecasted average of West Texas Intermediate to $75/barrel from $79/barrel.
According to Horner, every $1 drop in oil price works out to a loss of around $600 million from provincial coffers.
Horner, cautions that in the overall picture, while a significant sum, a $2 billion-plus surplus is “not a large surplus” when the overall budget comes in somewhere around $70 billion.
As already noted, half of any surplus must go towards debt repayment; the other half of the surplus goes into the Alberta Fund. From there one of three things can be done with it; one, more of the money can be put towards the debt, two, the funds can be put towards the Heritage Trust Fund, or three, they can be allocated for one-time program spending.
The update noted a promise to keep the fuel tax off until at least the end of December, saving Albertans $0.13/litre every time they fill up their vehicles.
“It’s one more way we are keeping life affordable for Albertans,” said Horner.
When asked about keeping the tax off past the end of the year, Horner said it is a “guarantee” it will be discussed, along with other affordability options the premier and cabinet will look at.
One omission in the fiscal update was anything regarding the impending buy-out of the DynaLife lab services contract by the province; when asked about it Horner noted that the deal was not yet finalized, but more information should be coming by the end of the year.
Another topic of conversation during the media question portion of the press conference was the “unprecedented fire year.” When asked about funding for the forest fire costs, Horner stated that the province has set aside $750 million for fire fighting, of which around $550 million has been used, along with $175 million in “uninsurable losses.”
The federal government is expected to pick up $75 million worth of costs for the unisnsurable expenses and $55 million to assist with evacuee expenses.
A final topic discussed was the ongoing drought in the southern parts of the province, and the possibility of the province instituting the AgriRecovery Program.
“Events seem to happen more often and are more impactful,” agreed Horner, noting that the Government of Alberta had requested the federal government activate the program, which is paid for in a 60/40 split between the two levels of government, in July but has yet to hear back.