EXCLUSIVE： Alberta Finance Minister Travis Toews on the budget.
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Summary
For the first time in a long time, Alberta has a balanced budget. Finance Minister Doug Horner and his team were able to balance the budget after a challenging few years. In this episode, we talk to Finance Minister Tays Taylor about the reasons why the budget was balanced and what they plan to do to keep it balanced in the future.
Transcript
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Well, Minister Tays, thank you very much for joining us today. And it's for the first time
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in a long time, we've seen a balanced budget. We've really needed some good news over this
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last couple of years. So I imagine it must have been nice to be able to present that yesterday.
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It was a real pleasure. It's a privilege to present a balanced budget on behalf of Albertans.
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It's been, I believe, Doug Horner was the last finance minister that ultimately balanced the
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budget in this province. And that's been too long. It was a real privilege to get to balance.
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Great. So, I mean, it still, of course, raises a lot more questions now that we look in the longer
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term. Part of why the budget was balanced, of course, was some very high commodity prices these
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days. And we know those tend to go up and down. Is there plans, though, to moving? I mean,
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there are spending increases. We understand it's been a challenging few years, but moves towards
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fiscal restraint in the incoming years so we can maintain these balanced budgets?
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Well, absolutely, Corey. In fact, a big part of the reason why we're balanced in this upcoming
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budget is because of fiscal restraint. We inherited a government that was spending $10 billion more than
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comparative provinces. The cost trajectory was going up 4% per year. Had we stayed on that trajectory,
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we would have been showing a $6 billion deficit in the upcoming year. It was only because we've
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turned spending down. We've flattened spending, brought our cost up per capita of delivering
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government services down. We've aligned it now with other provinces, which was a key fiscal anchor.
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And that's, again, a big part of the balanced budget story. I mean, you talk about higher energy
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prices and, you know, we're benefiting from those higher prices, but we're using, I would say, very modest
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energy price assumptions in this budget. We're using $70 for 2022, $69 for $23, and $66 for $24. So we're not,
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you know, this isn't a balanced budget on $80 and $90 oil. This is a balanced budget on very cautious but
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credible energy price assumptions. Yeah. And with those cautious assumptions and assuming things stay,
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though, as most people feel they will in the commodity world, there's probably going to be more
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surpluses to come in future budgets. What about debt retirement? I mean, we still have the debt now hanging
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there and we're lucky that interest rates are low right now, but that won't last forever. Is there going to be a
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longer plan to start knocking that net debt away on us? Well, you know, Corey, we will develop a very
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comprehensive plan to deal with unexpected surpluses. Right now, we're projecting very modest surpluses. And I will say
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this, what we will do with a modest surplus is just reinvest that into the Heritage Savings Trust Fund.
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As you probably know, over the last number of years, governments have been pulling Heritage Savings
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Trust Fund investment income into general revenue. And the first thing we're going to do is stop robbing
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that Heritage Savings Trust Fund. Once we are reinvesting those earnings into the fund, at that
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point in time, we will consider our options and either debt retirement or further trust fund
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investments. One of the two are a combination of both. Obviously, we're going to have to consider
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our cost of capital, the time of debt maturity, and inflation rates and a number of other factors.
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And I will be very interested in hearing from Albertans around that question.
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Great. Actually, you got ahead of me there. I was going to ask if you were going to start putting
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money back into that Heritage Fund. Is there legislative controls or ways, though, that we could perhaps
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assure that, you know, yourself or even future governments have to go through a bit more of a process
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before rating it as we've seen in the past? Well, absolutely. Right now, there is a fiscal rule.
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I think a very, very good baseline fiscal rule that requires reinvestment in the Heritage Savings
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Trust Fund up to inflation or CPI. So we've, of course, been following that. And the fund has been
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growing, but not, you know, not growing in real terms. It's just been keeping up with inflation.
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We're going to consider fiscal rules for unexpected surpluses in the future. And again,
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right now we would anticipate a combination of debt retirement and further investments into that
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Heritage Savings Trust Fund. One thing we will not do is open up the wallet and start spending
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irresponsibly. Okay. And then on the other aspect, you get some more breathing space for perhaps
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some tax relief. A large part of the budget was balanced on revenue from personal income taxes,
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which is a good sign of a strong economy. But we do have that ongoing bracket creep going on.
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And is there plans to address that now that we're going into the future?
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The answer is yes. We made a commitment to Albertans that we were going to pause indexation
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until basically we got to balance, until we got to a firm fiscal footing. And right now,
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we're projecting a balanced budget. We're not there yet. As we work through the year,
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and as our price assumptions, economic assumptions, as we determine they're going to hold true,
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Okay. And then, you know, it's an ongoing question, getting away from commodity dependency. I mean,
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again, it's not the whole basis of balancing the budget, but it's a large part of it. And we've been
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overly reliant, in my view, on it for a long time. So what sort of plans are there? It's always the
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economic diversity, I guess, that people are always chasing. What sort of plans have you got to get
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this so that we can start balancing these budgets without higher oil prices?
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Well, I mean, there's two things to look at there. I mean, realistically, there's your revenue
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structure as a jurisdiction. We have a very definitive taxation royalty structure in this
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province that ultimately generates revenues. And at some point in time, we've committed to
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appoint a revenue panel that would evaluate the appropriateness and structure and efficiency
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of our revenue system here in Alberta. We will do that before the end of the term.
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But the other way to create less volatility, Corey, and I think you're alluding to this
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for government revenues, is to see more diversification in our economy. And from day one,
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we've been working to position the province for disproportionate investment attraction
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and economic growth. And that's happening. We've taken a broad-based approach. In other words,
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an approach that doesn't pick winners and losers so much, but provides a level playing field,
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which I believe will result in sustainable economic diversification. And we're seeing
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the investment pour into this province. We can look at the tech sector, the growth in that sector
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over the last few years. We can take a look at agriculture and agri-food manufacturing.
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Certainly, the aerospace and aviation sector is growing. The manufacturing sector
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is growing significantly in the province. Certainly, we're seeing lots of announcements,
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multi-billion-dollar announcements around petrochemical manufacturing and hydrogen.
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So all of this is leading to a more diverse, less volatile revenue base for the province.
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So that has to be part of the plan. And it will continue to be a key plank in improving our fiscal
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Great. So I can assume there's no plans to raise the corporate tax rate or anything like that,
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Listen, Corey, we intentionally reduced our business tax rate from 12% to 8%. That's been a key ingredient
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in ensuring we have the most competitive business environment possible. We committed to that. We're
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Excellent. Just one area, as we close up, there was some increased spending, and I think people
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kind of expected it, though, was in healthcare. We're looking at, you know, hopefully broadening our
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provision abilities so that we aren't as vulnerable when incidents such as this pandemic happen. Is
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that going to be targeted spending then to ensure we reduce the, you know, the pressures on ICU and
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Absolutely. We're making further investment in healthcare. We're increasing healthcare's
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budget this year by $600 million. And no doubt there are pressures in the system. But the real
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focus is around expanded capacity. COVID has really demonstrated the lack of margin that we have in
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our healthcare system, the lack of surge capacity that we have in our ICUs, for instance. And so a lot
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of this investment is going to be targeted to strategic increased capacity in healthcare, including
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Great. Well, thank you very much for your time today, Minister Teys. And I hope we can look forward
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to talking about balanced budgets for some time to come yet.
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