Alberta creates fiscal accountability plan to require balanced budgets

Click to play video: 'Alberta Budget 2023: Province to create legislation requiring balanced budgets'
Alberta Budget 2023: Province to create legislation requiring balanced budgets
WATCH: Finance Minister Travis Toews announces steps the Alberta government plans to implement to help the province maintain fiscal responsibility amid volatile revenue structures during the 2023 budget speech. – Feb 28, 2023

As part of its budget released Tuesday, the Alberta United Conservative government introduced a fiscal accountability plan that would legislate balanced budgets and control spending long-term.

With a few exceptions, Alberta governments will be required to table balanced budgets and limit spending increases to population growth plus inflation.

It would also limit in-year spending increases.

“The fiscal framework will ensure the government continues to prioritize saving for the future and paying down debt,” Finance Minister Travis Toews said. “And balanced budgets will become the norm instead of the exception.”

Click to play video: 'Alberta government creates fiscal accountability plan to require balanced budgets'
Alberta government creates fiscal accountability plan to require balanced budgets

The framework would also set a policy for allocating surplus funds, one of which is repaying debt, which “is the best use for a surplus,” Toews said.

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Debt is expected to climb to $78.3 billion by March 2024. The province wants to pay that down to reduce debt-servicing costs, which are forecast to be nearly $3 billion.

Under the proposed framework, the other option for a surplus is into the newly created Alberta Fund.

“The purpose of the Alberta Fund is to bring discipline to the use of the surplus,” Toews said. “There are only three uses for funds that end up in the Alberta Fund, which is all the surplus which is not being used for debt repayment in the year that it’s achieved.

“Those uses are holding the funds for future debt repayment, additional deposits into the Heritage Savings Trust Fund, and a one-time expenditure on strategic government priorities that are non-reoccurring. In other words, not just dumping it into programs and ultimately inflating the cost of delivering programs to an unsustainable level.”

Budget 2023 shows the Alberta Heritage Savings Trust Fund retaining 100 per cent of its net income, growing to an estimated $20 billion.

The proposed legislation would only allow budgets in the red when there are emergencies like COVID-19, disasters, or unforeseen expenses that arise.

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Even if such events occur, the government would have to get back into balance within two years.

Click to play video: 'Canadians will see high oil and gas prices through 2023'
Canadians will see high oil and gas prices through 2023

The UCP says the Alberta Fund is intended to create guard rails on spending surplus.

“I just don’t buy it,” NDP leader Rachel Notley said. “They have played fast and loose with billions and billions of dollars every year since Travis Toews has been the finance minister.”

“What we have here is a number of different ways that Danielle Smith isn’t putting together a plan to use the surplus due to high oil prices, but to use it as her own personal campaign slush fund,” NDP finance critic Shannon Phillips added.

“She’s booked herself what she’s called an Alberta Fund for one-time initiatives so there might be even more slush in this budget for her to deploy prior to an election and that’s really, truly scary.”

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Toews countered that accusation directly, saying: “It’s anything but a slush fund.

“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 sitting in account.”

Phillips supports smart spending. “Yes, fiscal anchors are a good thing,” she said.

“The question is whether you can trust these guys to put it into place, especially with the record they have.”

Crestview Strategy analyst Bill Anderson said the UCP will have to make the parameters around the Alberta Fund very clear.

He said after two years of surplus budgets for the UCP, the long-standing political question is how to use money when times are good.

“Political risk for this government would have been not spending enough of it heading into this election but there’s also a question of what do you with what you don’t spend,” Anderson said.

“We’ve had an Alberta Heritage Savings Trust Fund in previous years and there’s been a lot of debate about how that should be used.”

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The Canadian Taxpayers Federation is praising the fiscal plan.

“Committing to balanced budgets, debt repayment and saving for a rainy day shows this government is serious about not repeating the mistakes of the past,” said Alberta director Kris Sims.

“In 1999, Premier Ralph Klein committed to putting 75 per cent of the province’s surplus down on the debt. That rule kept his government from blowing the surplus each year and remaining committed to making Alberta debt-free,” Sims said. “Following Klein’s lead is a strong showing that this government is committed to debt repayment.”

The consequences of breaching the balanced budget rule aren’t laid out.

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“One-hundred days of jail time, how’s that?” Toews joked, when asked by reporters Tuesday.

“For a government to contravene its own legislation … would be far more than embarrassing. It would be a public spectacle and there would be a huge political cost to bear,” he said.

“Simply passing legislation around these fiscal rules provides real teeth in terms of the impetus for governments to follow them.”

Toews said he hopes to pass the legislation in the next three to four weeks.

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