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Alberta urged to overhaul dormant heritage savings fund Commission submits proposals to solve province’s budgeting difficulties by pouring all oil, gas royalties into fund and withdrawing a fixed amount for spending Gary Park PNA Canadian Correspondent
Alberta is being urged to crack open its energy nest-egg. A government-appointed commission said the C$12.4 billion (US$8.2 billion) Alberta Heritage Savings Trust Fund — a near relative of the Alaska Permanent Fund — has been dormant for too long and needs a complete overhaul.
Among its 25 recommendations, the commission called for the word “savings” to be dropped from the title and said the fund should be transformed into a type of bank account from which the province could withdraw each year to pay for highways, health-care and education.
The report said the new fund would play a “dynamic and essential role” in Alberta, but the change would require a major shift in thinking by Albertans who have grown attached to 26 years of having a rainy-day account to be available at a time of need.
The commission is proposing that Alberta pour all of its oil and natural gas royalties along with year-end budget surpluses into the Alberta Heritage Fund and withdraw pre-set amounts for spending each year.
Monies to be used for general spending For the near term, the commission called for C$3.5 billion to be siphoned out of the pool for general spending, or the average of annual resource revenues for the past three years — whichever was less. Some of the fund’s contents would also go towards eliminating Alberta’s remaining debt of C$6 billion by fiscal 2005-06. The allocation would be reviewed every five years.
The strategy is designed to end a budget planning headache for the government as oil and gas revenues fluctuate wildly from a peak of C$10 billion to a low of C$2 billion, leaving the province awash in cash or forced to abrupt slash spending.
The commission predicted the revamped fund would grow during years when resource revenues were high and could potentially double by 2025.
“I think we’re going back to the basics or grassroots,” said commission Chairman David Tuer, who surprisingly resigned as chief executive officer of PanCanadian Petroleum before it agreed to a merger with Alberta Energy Co.
He said the existing fund “has stood still for a decade (since the government stopped making annual contributions). In real terms, it has not only not grown, it has actually lost value. We believe we should be giving it the opportunity to grow,” he said. Finance Minister Pat Nelson said the proposals offer a “framework to move us forward, to make some long-term planning and gain some predictability.”
She hopes to introduce legislative changes in the fall after the plans are put before the legislature’s finance committee and the government caucus this summer.
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