Sat. Mar 2nd, 2024

L’Alberta doubles sound anticipated budget surplus

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More than half of the budget surplus is devoted to repaying the debt.

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High oil royalties and good tax revenues have Alberta anticipating a $3.2 billion increase in its budget surplus. The latter is now expected to reach $5.5 billion by the end of March, more than double the budget.

Despite this improvement , the Alberta government is sticking to its fiscal framework and plans little additional spending.

On the contrary, the provincial gas tax will return from January 1 on a sliding scale. Albertans will pay up to 9 cents more for their gas for the first three months of 2024 and up to 13 cents more in subsequent months depending on the price of a barrel of oil.

The establishment of a new tax bracket, which was proposed during the election campaign in May, was also not included in the budget forecasts.

About $3.2 billion of the surplus will be used to pay down the debt, and $1.6 billion will be allocated to the new fund called the Alberta Fund. However, the provincial government has not yet made a decision on how this amount will be used.

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The second quarter economic update notes the risks ahead. Volatility in oil prices, inflation challenges and uncertainty surrounding a global economic slowdown could still harm the province's finances, the provincial statement warns.

The surplus should therefore fall to $2.1 billion next year, before recovering to $2.8 billion in 2025-2026.

The year 2023-2024, however, exceeds the government's expectations, with anticipated revenues reaching $74.3 billion, or $3.7 billion more than in the budget tabled in February.

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More and more oil sands sites are maturing, which increases their royalty rates, but also makes provincial finances more sensitive to changes in the price of oil.

Tar sands royalties were increased by $1.8 billion compared to the 2023 budget thanks to an increase in the price of a barrel of oil over the summer. West Texas Intermediate, the price in the North American market, reached more than US$90 ($120 CAD) in late September, but has since lost more than $10.

The government also expects three oil sands projects to come to fruition this year, increasing the royalty rate those projects pay.

The increase in population and gains in the labor market also allow us to expect good tax revenues from personal and corporate income tax.

On the expense side, the hard blow comes mainly from natural disasters, but all of these costs are covered by the contingency fund.

The bill from wildfires, drought and other natural disasters is now projected at $1.2 billion.

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