Calgary: The Frontier Centre for Public Policy today released an updated report from Mark Milke on the Alberta Heritage and Savings Trust Fund, and called on the Alberta government to implement the Jack Mintz report, also released this week, which urges making saving resource revenues and deposits of the same into the Heritage Fund a priority.
In a 32-page report prepared entitled Restoring Peter Lougheed’s Original Vision, the Frontier Centre’s director of research Mark Milke noted that since fiscal year 2003-04, when Alberta became debt-free, the provincial government has taken in $47.3 billion in natural resource revenue and has deposited only $3.9 billion into the Heritage Fund.
Also, in a comparison between Alaska’s Permanent fund and Alberta’s Heritage Fund, and using mid-2008 per capita figures, the Alaska fund is worth $54,514 per Alaskan while the Alberta fund is worth $4,770 per Albertan.
“Since the inception of both funds, the Alaska government has taken a consistent and disciplined approach to its natural resource fund and in fact must do so according to the Alaska constitution and through legislative requirements,” said Milke. “In contrast, the provincial government in Alberta has taken an ad hoc approach, including even to recent deposits to the Alberta Heritage and Savings Trust Fund.”
Milke noted that while the provincial government has also deposited other sums into other savings funds, such as the province’s Sustainability Fund and Capital Account Fund, these are not truly savings funds akin to the Heritage Fund; the intent is to spend the money deposited in the other funds in the short- to medium-term.
Some points from the study:
• Meagre deposits in the Heritage Fund result from provincial spending that has far outpaced the combined effect of inflation and population growth. Per capita spending on programs jumped from $6,789 in 1995 to $9,396 in the last fiscal year, and will reach an estimated $10,077 in the current fiscal year (2008-09). (Figures are in real dollars, i.e., after inflation);
• Such spending is unsustainable. Had the province collected only half of the resource revenues it actually did since 1995, the province’s spending pattern means deficits would have occurred in seven of the fiscal years since 1995;
• Spending must not be allowed to rise beyond information and population growth;
• In Mark Milke’s 2006 report on the Heritage Fund for the Certified General Accountants Association of Alberta and the Alberta Chambers of Commerce, the author then recommended that between 30% and 40% of resource revenues should be placed into the Heritage Fund every year. The author repeats that recommendation in this updated study of the Heritage Fund;
o If the province deposited 30% of resource revenues into the Fund every year, and continued to inflation-proof the fund, the Fund would stand at over $77 billion by 2025. (In this scenario, the province could still withdraw $36.1 billion from the Fund over this period for general revenue purposes.)
o If the province deposited 40% of resource revenues into the Fund every year, and continued to inflation-proof the fund, the Fund would stand at almost $95 billion by 2025. (In this scenario, the province could still withdraw $42.3 billion from the Fund over this period for general revenue purposes.)
• The province should consider additional transfers of money into the Heritage Fund beyond the 30% or 40% every years as circumstances allow.
The report can be downloaded here
For more information, contact:
Director of Research
Frontier Centre for Public Policy