Alberta
Don’t use Alberta’s Heritage Fund to pick ‘winners and losers’
From the Fraser Institute
During the mid- to late-1990s, Alberta taxpayers lost more than $2 billion from these failed loans, guarantees and share purchases in major business projects.
Remember the old adage from the writer and philosopher George Santayana that “those who cannot remember the past are condemned to repeat it.”
At a recent Calgary Chamber of Commerce event, Premier Danielle Smith indicated the Alberta government is looking at using Heritage Fund assets “to assist in de-risking projects that were finding it difficult to get financing.” This signals a return to the Alberta government’s industrial policy of the 1970s and 1980s of being in the business of being in business and government picking “winners and losers” as Premier Klein famously said.
A remembrance of the past is in order, so we aren’t condemned to repeat it. Between 1973 and 1992, the Alberta government took a very active role in cultivating economic development. The approach was highly interventionist and involved direct financial assistance through direct loans (even ones issued though the Heritage Fund), loan guarantees and share purchases. The risks attached to these transactions, particularly in a highly cyclical and volatile economy such as Alberta, were significant, generally unknown at the outset, and largely open-ended.
Sure, there were some notable exceptions, but the high degree of risk of direct intervention in the private sector was illustrated by the fact that during the mid- to late-1990s, Alberta taxpayers lost more than $2 billion from these failed loans, guarantees and share purchases in major business projects.
Most notable were losses incurred on such high-profile business projects as Novatel Communications ($556.0 million), the Lloydminster Bi-provincial Upgrader ($392.5 million), the Millar Western Pulp Mill ($244.2 million), Gainers ($208.3 million), the Magnesium Company of Canada ($164.0 million) and the Alberta-Pacific Pulp Mills ($155.0 million).
The premier makes a valid point that financial markets may be averse to financing large business projects because of the risks associated with intrusive federal climate change policies and regulations. Thus, the argument is there’s a need for the provincial government to get involved in financing market failures in the capital markets.
However, from our remembrance of the past practises, raiding the Heritage Fund to pick “winners and losers” is the wrong prescription to solving this problem. Let’s use the tried and true policies of cutting taxes and streamlining regulations to attract more investment capital to Alberta to support business projects. And let’s focus on building a Heritage Fund of $250 billion to $400 billion that will help secure our province’s fiscal and economic future and the future for our children and grandchildren.
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Alberta
Just in time for Canada Day weekend! Crescent Falls ready to be enjoyed again
The new staircase structure and viewing platform are among many upgrades that visitors can look forward to at the reopening Crescent Falls Provincial Recreation Area. (Credit: Alberta Parks).
The popular Crescent Falls Provincial Recreation Area reopens following a significant capital investment to improve visitor safety and experiences.
Crescent Falls Provincial Recreation Area is ready to welcome visitors back to enjoy one of the most remarkable, accessible waterfall viewing opportunities in Alberta. The upgrades at Crescent Falls will help improve the park’s visitor experience. Guests can expect expanded parking, improved access roads, trails and day use areas, new and improved viewing areas to take in the falls and upgraded safety measures, including signage and wayfinding.
The Provincial Recreation Area (PRA) is reopening over the July long weekend after being closed since 2023. Visitors will notice increased public safety upgrades through additions such as new parking lots, a new stair structure to access the lower falls, new pedestrian trails, a new vehicle bridge to access the camping area and a viewing platform to enjoy the Crescent Falls.
“We are thrilled to welcome visitors back to Crescent Falls Provincial Recreation Area in time for the Canada Day long weekend. These additions will help visitors to safely access and enjoy the area’s natural beauty. Parks are for people and Alberta’s government will continue to invest in high-quality outdoor recreation opportunities.”
“Today marks a significant milestone for our community as we reopen the Crescent Falls Provincial Recreation Area following extensive upgrades. Our province is well known for its incredible natural beauty, and these improvements will make our backcountry more accessible and ensure that Albertans and those visiting our great province can continue to explore our stunning landscapes for years to come.”
Alberta
Alberta government must further restrain spending to stabilize provincial finances
From the Fraser Institute
By Tegan Hill
This year, program spending will reach a projected $14,334 per Albertan, which is $1,603 more per person (inflation-adjusted) than the Smith government originally planned to spend this year as outlined in the 2022 mid-year budget update.
Despite recording a $4.3 billion surplus last year, Premier Danielle Smith remains committed to a new approach to Alberta finances that relies less heavily on resource revenue, which includes restraining spending levels below the rate of inflation and population growth. That’s a big step forward, but is it enough to stabilize Alberta’s boom and bust rollercoaster?
First, some background.
After nearly a decade and a half of routine budget deficits, Alberta swung to a budget surplus when resource revenue (which includes includes oil and gas royalties) skyrocketed from $3.1 billion in 2020/21 to $16.2 billion in 2021/22. In 2022/23, the government enjoyed the highest level of resource revenue on record and relatively high levels have continued in recent years. Correspondingly, Alberta’s surpluses have continued.
Alberta governments have a habit of increasing spending during times of high resource revenue, such as the province is currently experiencing, to levels that are unsustainable without incurring deficits when resource revenue inevitably declines. That’s why the Smith government’s commitment to spending restraint is an important one.
Unfortunately, however, due to the Smith government’s spending increases in previous years, this restraint won’t go as far in stabilizing provincial finances. Moreover, there are a number of limitations and exceptions to these new spending rules that may impede their effectiveness.
Consider that this year, program spending will reach a projected $14,334 per Albertan, which is $1,603 more per person (inflation-adjusted) than the Smith government originally planned to spend this year as outlined in the 2022 mid-year budget update.
As shown above, program spending (inflation-adjusted) will reach a projected $14,041 per person in 2025/26 and a projected $13,750 per person in 2026/27, which is equivalent to per-person increases of $1,571 and $1,538, respectively, compared to the original plan in 2022.
So while per-person (inflation-adjusted) spending is set to decline, which aligns with the Smith government’s commitment, this restraint is starting from a higher base level due to spending decisions thus far. That means more work needs to be done to rein in spending.
Indeed, for perspective, if the Smith government had simply stuck to its original plan, spending would be closely aligned with stable, more predictable sources of revenue. And ultimately, that’s the way to avoid deficits.
There’s also several limitations and exceptions for the government’s new spending rule. For example, the spending limit applies only to “operating expense,” which does not include longer-term spending, disaster and emergency assistance, spending related to dedicated revenue, or contingencies. As a result of various limits and exceptions, total program spending growth in 2023/24 exceeds inflation and population growth by 1.8 percentage points. Put simply, these limitations and exceptions add to the risk of budget deficits.
Sustainable finances have been impeded by increases in per person spending since 2022. So while the Smith government deserves credit for its commitment to restrain spending moving forward, Alberta’s fiscal challenges aren’t over.
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