Alberta records $4.3-billion surplus to end fiscal year

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Higher expenses, a decrease in corporate income taxes and volatile oil prices are hitting the UCP provincial government squarely in the campaign promises, despite a $4.3-billion surplus.

The figures come from the 2023-’24 year-end results and annual report from Finance Minister Nate Horner, under Premier Danielle Smith.

The surplus comes thanks to healthy non-renewable resource revenue of $19.3 billion, with $14.518 billion directly from bitumen royalties, up from the budgeted $12.5 billion.

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But natural gas and by-product royalties were just $1.1 billion, down $1.4 billion from budget and $2.5 billion from 2022-’23, following the downward trend in oil and gas prices.

Asked why, with a surplus, an election promise of a tax cut estimated at $1.4 billion will have to wait until 2026 and 2027, Horner responded, saying “that didn’t happen, and I was forced to deal with the realities of 2023-2024.

“If I would have brought in the promised tax cuts that we will bring in its entirety, in budget 2024 we would have ran around a $1.1 billion deficit, which I can’t do thanks to the fiscal framework and prudent planning,” he said.

“Nobody wants to bring in the tax cut more than me, more than the premier. And if things change and we’re able to accelerate that timeline, I will be the first to put that on the floor.”

The document attributes a reported $1.1 billion drop in corporate income taxes since 2022-’23 to “softer corporate profits and weaker commodity prices.”

Nutshelled, revenues of $74.7 billion include $26.7 billion in tax revenue, and $19.3 billion in non-renewable resource revenue.

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The province’s total expenses come to $70.4 billion, including $3 billion in disaster and emergency assistance, $27.2 billion for health, $9.4 billion for K-12 education and $6.8 billion for post-secondary education, with $8 billion for social services, including indexation of social benefit programs, and $6.3 billion for the province’s capital plan.

The largest single line item in the provincial budget is always health, with a $632 million increase to the health operating budget of $25.17 billion.

Since the budget dropped in March, the UCP government has built into the current expense estimate increases of $3 billion for wildfire and disaster response, with $1.9 billion for insurance payments for drought-stricken farmers and ranchers and $1.1 billion for wildfire response.

Federal government contributions to the revenue pie is up, with $12.3 billion in federal transfers.

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Growing pains

In recent headlines, municipalities and urban school districts have repeatedly chafed at the effects of population growth, with the provincial government accounting for some for growth but not for inflation in their allotments.

On Thursday, Horner acknowledged heightened pressures on government programs, services and infrastructure. He also cited consumer impacts of rising housing demand driving up house prices and rents — as well as rising interest rates and the price of groceries.

Alberta broke population growth records in 2023, with 56,000 people from other parts of Canada and another 113,000 from around the world coming to the province, he said.

“That’s like adding another Red Deer and another Fort McMurray to our province,” he said, adding that the visibility of the benefits of growth tend to lag about 18 months as new Albertans get up and going.

Employment growth of 3.6 per cent topped the national growth rate of 2.4 per cent, with a gain of 85,000 new jobs, mostly full-time in the private sector, accounting for “nearly 90 per cent of the private sector jobs created across Canada in the last six months,” he said.

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Revenues of $15.2 billion from personal income taxes are “driven by Alberta’s robust labour market underpinned by strong population growth,” Horner said

No change to fuel tax

Horner said the fuel tax will not go up next month.

“To be totally clear, there will be no change in the fuel tax July 1,” he said. “It’s easy for some governments to turn to taxes and want to raise taxes to expand services and spending. We’re committed to not doing that.”

He assured Albertans saved around $680 million in 2023-’24 as the government continued to index the personal income tax system to inflation.

Income tax credits and tax bracket thresholds increased by six per cent in 2023 and 4.2 per cent in 2024, and Albertans on social supports received higher payments with indexed social benefit programs and direct payments early in the fiscal year, the report said.

“Our province and our economy are directly impacted by global uncertainties, fluctuating oil prices and increased risk of natural disasters and emergencies, but Alberta was a beacon of opportunity amongst the challenges that face governments across Canada and around the world,” Horner said, touting increased spending on health, education and disaster management.

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The province uses industry forecasters, and tries to budget conservatively by staying in the bottom half or bottom one-third of projected revenues, “just to ensure that there is that potential upside, because the downside is unavoidable,” he said.

“I think the point of the fiscal framework is that in the good and decent years, we don’t waste it, we don’t ratchet up spending and then see oil go down to $45 (a barrel) and bring forward a $30 billion deficit. This is about stability for Albertans who do enjoy the lowest taxes and highest wages in the country, and as the stats show them, the most opportunity,” he said.

Some $20 billion in resource revenues “correlate almost directly” with the tax advantages Alberta sees over neighbouring provinces, Horner said.

“It’s an opportunity, it’s a challenge — it’s volatile … there’s things that are out of our control, but it’s also a wonderful benefit,” he said.

Down with debt

Debt servicing costs were $301 million higher than estimated at Budget 2023, for a total of $3 billion, due mainly to higher interest rates and significant debt maturities coming due in early 2025.

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In 2023-’24, the government began the year with $5.1 billion in surplus cash from 2022-’23 and added $2.2 billion in surplus cash from 2023-’24, bringing the total surplus cash to $7.3 billion, Horner’s report states.

From that, almost $4 billion is expected to boost the forecast value of the rainy day Heritage Savings Trust Fund, to almost $23 billion, which averages returns between seven and eight per cent, Horner said, comparing it to the difference between RRSPs and a home mortgage.

“In many instances, I doubt you would cash out your RRSPs to pay off your mortgage,” he said.

Samir Kayande, Alberta NDP critic for finance, said the fiscal year-end update’s boast of a surplus rings hollow.

“Albertans have seen our health care and education get worse under the UCP and won’t see the tax cut they were promised during the election,” Kayande said.

“There are 29 partially closed hospitals across Alberta today. A rural community health centre is slated to close permanently at the end of this week,” he said. “Cancer patients aren’t getting treatment because of a lack of oncologists.”

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Kayande pointed to a $5.9 billion government spending increase while education suffers.

“Our schools and post-secondaries are overcrowded and underfunded. Albertans are squeezed between rising prices and the lowest wage growth in Canada,” he said.

“(Premier Danielle Smith) is wasting our resource endowment, wasting taxpayers’ money, and Albertans’ lives get worse every day.”

jcarmichael@postmedia.com

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