Alberta is poised to pocket $2.9 billion in surplus cash next year due to high bitumen prices, the province’s finance minister says, but rising economic risks could easily turn that rosy picture black.
Alberta Finance Minister Nate Horner gave the 2024-2025 second quarter fiscal update and economic statement on Nov. 21, giving a snapshot of the province’s finances.
During last August’s first-quarter update, Horner said the province would not see a cash surplus by the end of this fiscal year and would have to actually borrow about $600 million more than expected.
High bitumen and income tax revenues have radically changed that prediction, the update showed. The province now expects to take in about $4.4 billion more revenue this year than expected, some $3.1 billion of which was from bitumen royalties — a consequence of a smaller difference between the price of light and heavy oil and a weak Canadian dollar.
The forecast showed that Alberta was poised to post a $2.9 billion cash surplus at the end of this fiscal year, which would be split 50/50 between debt repayment and the Alberta Heritage Fund, as per the province’s fiscal framework.
Warning lights
The update projected a $1.2 billion increase in operating expenses from budget. Some $716 million of this was health-related, a consequence of a growing, aging population that needed more lab tests and urgent care. Another $240 million was going to income support due to high rates of population growth (4.4 per cent this year) and unemployment (7.2 per cent). There was also $125 million for schools to address enrolment pressures and some $847 million in disaster and emergency aid related to wildfires such as the one in Jasper.
These expenses would eat up about $1.7 billion of the budget’s $2 billion contingency fund, Horner noted.
“That’s worrying, because it leaves only $279 million to address any additional pressures that may arise. It means we have to move forward cautiously and spend wisely.”
Horner also noted that this cash surplus assumed oil prices would stay at $74 a barrel — certainly not guaranteed, given that they had already dropped considerably this year. Oil prices have been bobbing around $70 a barrel since September, and every $1 drop in oil prices plucks $630 million out of the province’s pockets.
“Should oil prices continue to drop or remain below our budget projections, there is a real risk Alberta could run a deficit next year,” Horner said.
The fiscal update is available at bit.ly/40YrlZv.
