Will Premier Smith be able to grow the Heritage Fund?
Posted February 22, 2024 3:54 pm.
Last Updated February 24, 2024 9:29 am.
Premier Danielle Smith told Albertans Thursday night her government could grow the Heritage Trust Fund by a quarter of a trillion dollars by 2050.
But growing the fund is something Albertans have been promised again and again by former Alberta premiers.
In 2009, then Premier Ed Stelmach said, “Seeing how we can wean ourselves from using the interest of the Alberta Heritage Trust Fund. So if we want to see it grow, we have to keep the interest in the fund.”
In 2013, Premier at the time Alison Redford said, “This marks the first time in 25 years that Alberta has focused on a plan for savings. That includes reinvesting in the Heritage Fund. “
In 2015, Former Premier Jim Prentice said, “I truly believe one of the greatest mistakes we have made, is letting our commitment to the heritage fund lapse and that is something I will change.”
Those are just a few of the clips from Premiers promising growth of the Heritage Trust Fund — a fund created in 1976 under Premier Peter Loughheed — to collect a portion of Alberta’s resource revenue.
Here’s how it works:
“30 per cent of non-renewable resource revenue was supposed to go into this fund, but successive governments like in the 80s when oil fell dramatically, they took out 15 per cent and then eventually came down to 0,” explained Chetan Dave, a professor of economics at the University of Alberta.
The fund currently sitting at $21.6 billion according to the Government of Alberta.
“Several countries such as Norway oil and gas producing nations around the world adopted that same strategy, and now soveriegn wealth funds large enough to eliminate those nation’s reliance on resource revenues,” said Premier Smith.
Norway’s sovereign wealth fund sits at just over $1.5 trillion.
Economists say Smith’s promise to grow the fund by nearly half a trillion dollars in 16 years can be done, but one key difference is that Norway’s fund is run independently — free from politics.
“Just like central banks that are politically independent and their mandate is only inflation targeting, you want to keep that a little bit separate so that it gives a chance for the fund to grow,” explained Dave.
Professor Dave says he’s waiting for details in the provincial budget to see how the province plans to grow the Heritage Fund but points to previous government’s track records on growing it, as well as what areas of the budget will see less spending to make up for investments into the fund.
Saying money has to come from somewhere and that could include the dreaded pst.
“Create an incentive structure for growth, dropping personal income tax and corperate income tax and shifting that onto a provincial sales tax and we’re gonna keep doing that to fund the needs of this province, healthcare, education,” explained Dave.
The provincial budget will be tabled on February 29.
