A Balanced Budget – An Uncertain Future

Albertans find themselves in the middle of a critical six-week period that will set the course for the remainder of the United Conservative Party’s first term as government. On February 24th, the province tabled its annual budget to outline the government’s projections for the next three fiscal years. On April 9th, United Conservative members will convene at a special general meeting in Red Deer to vote on whether or not Jason Kenney ought to remain as leader of the party.

In this article, we will examine some of the main highlights and reactions to Budget 2022. Additionally, we will preview the UCP leadership review and what comes next for the Government of Alberta.

Budget 2022: Moving Forward

Finance Minister Travis Toews left no room for interpretation when assembling the 2022-25 fiscal plan – this budget is about leaving the last two years in the rearview mirror and restoring the Alberta Advantage.

“We’ve worked hard across ministries to make responsible fiscal decisions and have relentlessly positioned the province for exceptional economic growth and expanded fiscal capacity, and it gives me great pleasure today to present Budget 2022, a balanced budget.” - Travis Toews, Minister of Finance

Indeed, the Alberta Government has tabled its first balanced budget in what may feel like forever, and it seems like balance is the plan for the duration of this fiscal plan. When the pandemic hit, the provincial government did not pull any punches when it informed Albertans that it would not be able to achieve balance before the 2023 general election due to the fiscal challenges brought on by COVID-19. But like things often do so quickly these days, plans change.

In Alberta’s case, the change in plans was the meteoric rise of the oil and gas sector. When Budget 2022 was released, WTI was listed at more than $90USD/bbl; however, the updated fiscal plan wisely takes a conservative approach to projections. Given the current increase in the cost of oil due to the Russian Federation’s invasion of Ukraine, oil may even eclipse all-time records. Of course, oil is a perpetually volatile industry, so we will not know the extent of royalty revenue until Budget 2023.

Alberta’s COVID-19 era budgets provided little to no hope that balance would be achievable prior to the 2023 general election, so seeing positive numbers is a welcome change. The projected surplus is estimated to be $500 million, $900 million, and $700 million over the next three fiscal years respectively. Budget 2021 was projecting a deficit of around $11 billion for 2022-23.

Taxpayer-supported debt is also forecasted to drop over the next three years. For 2022-23, the total is expected to be $94.7 billion (a decrease of $21.1 billion) with no forecast for it to eclipse $100 billion over the course of this fiscal plan. Net debt to GDP is forecast to finish this fiscal year at 18.3% which marks a reduction from the previous budget’s projections. Unlike the previous budget, the ratio is expected to continually decrease until 2024-25.

Real GDP is projected to increase nicely for the next fiscal year by 5.4%. Unfortunately, it is also expected to grow less rapidly than projected in Budget 2021, seeing gains of 3.5%, 3.0%, and 2.8% over the following three years.

In dealing with the sudden improvements to revenue projection, the fiscal plan indicates that “any surplus up to the value of the annual earnings of the Heritage Savings Trust Fund will be retained and re-invested in the fund. Any surplus in excess of those savings will be allocated between the Heritage Savings Trust Fund and/or debt repayment.”

The Capital Plan total spending has not changed a great deal year-over-year relative to Budget 2021. This new budget allocates $20.2 billion over the next three years for an average annual envelope of $6.7 billion. It is projected to support the creation of 19,000 direct and 12,000 indirect new jobs by 2024-25. The province’s unemployment rate is projected to be much improved over Budget 2021. The forecast for this year projects a 6.6% rate, dropping over the remainder of the plan to 5.5% in 2025.

Make no mistake – even though the next provincial election will likely not occur until May 2023, this year’s fiscal plan was absolutely a campaign budget.

Leadership Review

For Premier Kenney, his leadership review campaign began well before Budget 2022 was tabled last month. While it is difficult to pinpoint exactly when this transition happened, this writer would suggest things shifted into high gear with Chief of Staff Pam Livingston taking a leave of absence from the Premier’s Office to run her boss’s campaign team in the middle of February.

Now, we are 32 days away from discovering Premier Kenney’s fate. 

The rules for the special general meeting on April 9th stipulate that only in-person voting will be accepted. Of course, this means it will be more difficult for those outside of the Calgary-Edmonton Corridor to attend; however, the timing and location of the vote could impact the turnout from rural Alberta. The end of March – beginning of April time is often the start of seeding season for the province’s farmers, adding to the attendance challenge.

There is also the consideration of the potential impacts of Bill 81 which now permits the purchase of party memberships for other individuals other than oneself, without their written consent.

And for the Premier, he suggests that the standard majority threshold ought to be enough to remain in power, despite what previous conservative leaders in Alberta have experienced.

"In a democracy, a majority is 50 per cent plus one.”

While the above plays an important role in the future of the Premier, it is also true that the review’s political landscape has changed.  

Of course, there is a very vocal “anti-Kenney” by-election taking place in Fort McMurray-Lac La Biche headlined by Brian Jean who has made his political goals quite clear. But Premier Kenney is now fighting a multi-front battle with a new group that is challenging his leadership.

In addition to Brian Jean's campaign, there are other groups that have begun to mobilize in opposition of Jason Kenney's leadership. While they do not appear to be formally connected, a multi-front battle could pose some risk to the incumbent.

One thing holds true in nearly every type of political campaign – the one who has the best “ground game” wins. Among those in the UCP, Premier Kenney is by far and away the strongest political organizer and has a strong campaign history both provincially and federally. However, there is a growing sense that his leadership review opposition is much more organized and will be looking to mobilize dissidents across the province to their cause.

Historically, Alberta premiers have needed between 70-75% to remain as leader of their respective parties during a review. While Jason Kenney has said all he requires is a simple majority, anything less than a landslide victory will fail to quell the internal opposition he has faced for some time now.