Alberta’s Danielle Smith uses budget to promise big on health care

Danielle Smith’s pre-election budget includes $68 billion spending plan and $2.4 billion surplus

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Alberta’s first provincial budget under Premier Danielle Smith shows the government’s coffers will be buoyed once again by deluge of resource revenue, estimated to reach $18.4 billion in 2023 — the second highest resource bonanza in the province’s history.

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The province will end the current fiscal year with a slightly smaller surplus of $10.4 billion than was projected in November, as energy prices softened and the new premier increased spending in recent months.

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The 2023 fiscal plan, tabled in the provincial legislature on Feb. 28, shows surplus in 2023 of $2.4 billion and surpluses in the subsequent two years, continuing the oil-reliant province’s dramatic reversal in fortune after nearly a decade in the red.

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Smith’s $68.3-billion spending plan comes just three months before Albertans are set to head to the polls on May 29, when the premier will attempt to re-up the United Conservative Party’s majority in the legislature. It will be Smith’s first election as leader after winning the leadership of the UCP in the wake of former premier Jason Kenney’s resignation last year.

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The government pledged nearly $1 billion in additional health-care spending aimed at slashing wait times and increasing access to doctors and nurses, and billions more on new initiatives in education and justice.

Balanced budget law

Alongside the budget, the Smith government promised a new fiscal framework that will put guardrails on future spending, proposing new legislation that would require provincial governments to balance their budgets annually — while notably leaving room for a potential pre-election spending spree.

Under the proposed new policy, at least 50 per cent of available surplus cash in a fiscal year would have to be used for debt repayment, with the remaining amount set aside under the proposed “Alberta Fund.” The fund could be used by the government for debt repayment, additional payments to province’s existing Heritage Fund, or one-time spending initiatives that are likely to used for capital projects.

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Last year’s surplus cash is approximately $1.4 billion, the government said. The UCP government said the money would be eligible be used at the start of the new fiscal year on April 1 — just two months before the election.

“It’s anything but a slush fund,” said Alberta Finance Minister Travis Toews in a news conference. “It was conceived to bring discipline to the use of surplus — so surplus could only be used for three uses with a priority being saving and debt repayment.”

Toews said the new framework includes plenty of belts and braces on government spending, including a balanced budget requirement and a ceiling on increases to operating expenses to no more than inflation plus population growth.

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“The fiscal framework, the layering of protection, I believe will ensure that governments cannot act irresponsibly ahead of an election, per se, and spend a surplus that’s sitting in account,” Toews said.

The province said it also plans to introduce new rules aimed at growing the Heritage Fund from a projected $20 billion this year to a target of more than $22 billion in 2025.

Higher energy prices

Provincial balance sheets have improved significantly since 2022 on the strength of higher energy prices following Russia’s invasion of Ukraine.

Alberta projects oil prices will continue to moderate over the next couple of years and non-renewable resource revenues will decline, with the province forecasting that benchmark West Texas Intermediate (WTI) will average US$79 per barrel in 2023, tapering to US$76 per barrel in 2024.

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Nevertheless, energy prices at that level are high enough to drive economic growth of 2.8 per cent in 2023, more than the rest of the country, according to the budget.

Oilsands royalties will also be boosted this year thanks to two oilsands projects reaching “post-payout status” — when royalty rates increase dramatically on a project that has recovered its initial capital and operating costs. Higher oil prices have accelerated the payout of some projects, the government said, with four more projects likely to jump to higher royalty rates in 2024.

The Smith government has said it is focused on diversifying the economy, with new spending aimed at stoking economic activity in sectors such as aviation and aerospace, agri-food manufacturing, petrochemicals and hydrogen.

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For example, a $54-million-per-year increase to the province’s Alberta Petrochemicals Incentive Program (APIP) will help support Air Products and Chemicals Inc.’s planned clean hydrogen facility outside Edmonton.

Alberta, under pressure to match generous clean-technology subsidies in the United States, said it will also boost spending on carbon capture, utilization and storage projects in the province, with plans to spend $246 million over three years.

However, there was no announcement of any additional tax measures to support carbon capture, something energy industry advocates groups have been calling for. Nor did the province include any spending projections to reflect Smith’s controversial plan to give oil companies a break on oil royalties in exchange for cleaning up their wells, the so-called RStar proposal.

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Speaking to reporters at a briefing, Toews acknowledged a number of high-profile proposals from the UCP government didn’t make it into to the latest fiscal plan, including an Alberta pension plan and a provincial police force.

“You’re not seeing an Alberta pension plan in this budget, you’re not seeing a definitive Alberta police force in this budget and you’re not seeing an RStar program in this budget because none of those policies have been approved,” Toews said. “Right now, we as a government are reaching out on all of them and consulting Albertans.”

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