Cost of affordability measures pegged at $2.8B in Alberta fiscal update

Alberta's second-quarter fiscal update puts the costs of the province's new affordability measures at $2.8 billion over three years.

The update, released Thursday by Finance Minister Travis Toews, reveals the government will spend $1.3 billion on the affordability package in this fiscal year, $1.2 billion in 2023-24 and $300 million in 2024-25.

Premier Danielle Smith announced the measures in a televised address Tuesday night.

They include cash payments for seniors, families with children and people who receive AISH, PDD and income support; a suspension of the provincial gas tax, and help with electricity bills over the winter.

Officials with the premier's office on Tuesday put the cost of the package at $2.4 billion.

The money is coming mostly from the budget surplus for 2022-23, which is now forecast at $12.3 billion, $900 million less than the $13.2 billion forecast at the end of the first quarter. The government said the drop is due to softening oil prices and demand.

West Texas Intermediate oil is now forecast to average $91.50 US per barrel in 2022-23.

The surplus estimate for 2023-24 is $5.6 billion. In 2024-25, the surplus estimate is $5.3 billion.

The monthly $100 payments to seniors, families with children and others outlined in the affordability measures are set to start in January and continue three months into the next fiscal year.

The costs that carry over into the 2024-25 fiscal year account for the effects of reindexing social benefits and tax brackets to the cost of inflation. They were deindexed in 2019 as a cost-savings measure.

The mid-year update shows the province is forgoing nearly $1 billion in revenues in this fiscal year through the suspension of the 13 cent per litre provincial fuel tax which started April 1. Collection of part of the tax — 4.5 cents per litre — resumed on Oct. 1.

In her address on Tuesday, Smith said the government will suspend the provincial fuel tax entirely for at least six months as part of the affordability measures.

On Wednesday, a spokesperson for the premier said the affordability program will roll out beginning in January, after the government passes enabling legislation in December.

Heritage Trust Fund

In presenting the first-quarter update at the end of August, then-finance minister Jason Nixon said the province was making a $1.7 billion deposit in the Heritage Savings Trust Fund. However, that figure doesn't appear in the fiscal tables in Thursday's update. The government plans to keep $1.2 billion in interest in the fund.

During a news conference with reporters Thursday afternoon, Toews denied the money was being used to buy the votes of Albertans in the spring election and said the money that was supposed to go to the Heritage Savings Trust Fund wasn't paying for the premier's affordability plan.

"That trade-off did not happen here in this mid-year fiscal update," Toews insisted. "It simply did not."

Toews said $5.8 billion in cash has been set aside for "future considerations", which still could include a contribution to the heritage fund.

He said cabinet is working on a fiscal framework to decide how much of future surpluses would be used to pay debt, saved or spent on critical infrastructure.

Spending up 

NDP finance critic Shannon Phillips criticized the government for not acting on its promise to save some of the surplus in the Heritage Fund.

"Going back and forth on 'we're going to save $1.7 billion, oh just kidding, we're not going to save $1.7 billion,' the fact of the matter is the Heritage Fund is managed for the long-term," Phillips said. "This sort of ad-hoc, frantic approach is not good for the long-term fiscal sustainability of Alberta's balance sheet."

The second-quarter update covers the period from July 1 to Sept. 30 and reflects where the province's finances sit in the middle of the fiscal year. The figures in the quarterly updates are forecasts of how the year will end on March 30, 2023.

Alberta's finances have been buoyed by a surge in world oil prices partly caused by renewed interest in travel, which pushed up demand, and the Russian invasion of Ukraine.

The province is forecasting $79.1 billion in revenue and $64.6 million in expenses.

Spending is up $2.5 billion from the February budget.

Extra expenses include $64 million for school bus fuel and negotiated increases to teacher salaries; $340 million for the new agreement with physicians and the resolution of contracts with other health-care workers; and $50 million for victim services, legal aid and compensation for judges.

Revenue from non-renewable resources is forecast at $28.1 billion.

Corporate income tax is projected at $6.3 billion, which the government says is the largest amount it will ever collect. Revenue from personal income tax is expected to be $13.3 billion, $83 million lower than forecast in the February budget.

The province still plans to put $13.4 billion toward debt repayment. The debt is forecast to be $79.8 billion at the end of the current fiscal year.

The budget presented in February predicted a surplus of just $511 million, but that projection soared to $13.2 billion in the first-quarter update on the strength of oil prices in the US$100-a-barrel range.