Despite the escalating costs of battling wildfires taking a notable toll on its contingency budget and a slight decrease in oil prices, Alberta’s government remains hopeful, predicting a surplus of $2.4 billion by the close of the fiscal year. The encouraging figures emerged from the province’s first-quarter fiscal review.
Finance Minister Nate Horner effectively communicated that the overarching fiscal predictions for Alberta have remained consistent, despite a few unanticipated adjustments. Wildfire management expenses constitute the most significant unexpected factor. The natural disasters have plagued Alberta since early spring, depleting close to $1 billion of the fiscal budget so far.
The extraordinary expenditures have significantly surpassed the anticipated budget forecast, compelling the United Conservative government to draw deeply from its novel contingency reservoir. To date, Horner revealed, the province has designated $750 million to combat wildfires in 2023. Additionally, these funds comprise $175 million allotted to uninsurable losses, with an anticipated $75 million expected to be recuperated from the federal government. An extra $55 million has been allocated to emergency evacuation expenses.
This unforeseen spending has consumed approximately three-quarters of the funds initially reserved for emergencies. Horner acknowledges the stress this has placed on fiscal regulations.
The government is considering a substantial increase in the contingency fund, given that the frequency of extreme weather events shows no signs of declining.
Horner affirmed: “We will learn much from this year. We can’t deplete two-thirds of the reserves on disasters and expect sufficient coverage for annual changes. It’s something we need to closely examine.”
Interestingly, a predicted population surge of 4.4% has contributed to increased tax revenues. The expected rise of $1.5 billion from corporate and personal income taxes compensates for a considerable part of the $94-million upswing on the budget prediction. This acts as a financial comfort for the government during a period when oil royalties have dwindled due to underestimated prices.
A decrease in overall resource revenue of $694 million from the initial projection is anticipated in the fiscal update. Minor fluctuations in oil prices equate to significant revenue shifts for the province. Analysts estimate a $1 variation in the WTI corresponds with a $630 million difference in Alberta’s budget.
Sadly, no new affordability measures have been set aside in the fiscal analysis. Responding to the possibility of helping those financially struggling, Horner referenced the province’s current fiscal state. “The aim is to shrink debt during the prosperous years, I hope this brings some comfort to our citizens,” he told CTV News. However, this approach gains little traction with the everyday citizen, according to Alberta’s NDP finance critic, Samir Kayande. “It’s not enough to hope fiscal surplus will solve our problems. People need tangible help.”
The UCP’s recent fiscal model necessitates that at least half of its surplus funds be used to decrease its debt. This could mean as much as $2.6 billion might be channeled into the newly established Alberta Fund, available for one-off initiatives that won’t cause a permanent increase in spending.
There is widespread speculation that the Calgary arena project might be a beneficiary of this financial injection. This seems in line with the fiscal update that pledges $39 million in capital grants towards preparatory work and land acquisition in the city’s Rivers District. Although Horner declines to comment on the arena’s future, he hinted at a forthcoming related announcement from the premier.
