22 Things to Know About Budget 2022

There are few places in the world where, on any given day, regular people can quote the current price of a barrel of West Texas Intermediate crude oil. Alberta is one of those places. Yes, diversification matters, and Alberta’s economy is diversifying more quickly today than at any point in a generation. But the oil and gas industry still accounts for 25% of Alberta’s Gross Domestic Product. It contributes mightily to Alberta government revenues too, and it employs hundreds of thousands of people, people like Larry the pipefitter, whose story was featured prominently in the Budget Speech.

Without a doubt Budget 2022 and Tuesday’s Speech from the Throne were aimed at working class people like Larry, core supporters of the United Conservative Party. Premier Kenney needs their support as he faces a leadership review on April 9th in Red Deer. Fortuitously for the Premier, the Throne Speech announced new healthcare initiatives, including $1.8 billion dollars for a major expansion of the Red Deer Hospital. Something else that will resonate with UCP supporters in Red Deer and everywhere is a balanced provincial budget, which Finance Ministers Travis Toews announced today to his cheering colleagues in the Alberta Legislature. 

Not surprisingly, jobs are also important to Albertans. Budget 2022 contained numerous ‘reskilling’ supports, which should also find favour with UCP voters. This is on top of a dozen or so Throne Speech initiatives in support of homeschooling, palliative care, victims of crime, and combatting human trafficking, all of which will be popular in UCP circles.

The government also announced plans for a rebate system to ease the pain of spiking utility bills, but they will need to hurry. It seems unlikely that already testy Albertans are in a mood to patiently wait for relief while their monthly electricity and gas bills jump by $200 a month or even more.  

That said, Budget 2022 is likely to go over well with most Albertans, to the degree that they pay attention. Albertans would be forgiven if their focus was more on war between Ukraine and Russia and the potential lifting of remaining Covid restrictions as early as next Tuesday. As always, immediate, dramatic, and personal issues and events tend to demand our attention over everything else, even something as important but arcane as government budget-making.  

1. The Need to Know

It has been a startling turn around for the Government of Alberta’s finances. Last year’s massive projected $18.3 billion deficit has become a forecast $511 million surplus this year. The debt is expected to drop by about three billion next fiscal year. GDP growth should lead all of Canada’s provinces. Alberta’s lowest-in-the-country tax rates will stay that way. How did we get all this good fiscal news?

In typical Alberta fashion: oil and gas royalties. The difference between last budget’s forecasted resource royalties and actual royalties is a whopping $13.2 billion. Given inflation, the crisis in Ukraine, and reopening economies, the mini-boom should continue a while longer.

2.  A Picture is Worth a Thousand Words

3.  Some Room to Manoeuvre on the Revenue Roller Coaster

The government seems to be playing it safe in assuming oil prices will average US$70 a barrel in 2022. Better to err on the side of caution, given how quickly things can change. Who could have imagined that in the span of 20 months oil would drop to negative pricing and then shoot to almost $100-US a barrel? The budget also bakes in a $1.7 billion contingency reserve for the next year. If oil prices stay strong, if Covid stays away, and if the province can avoid fire, drought and hail, there could be even bigger surpluses than forecasted, just in time for the election in May 2023.

4. Costs of Government Remain Stable

It’s probably fair to say that public sector unions don’t care for the UCP and their ideas. The unions feel the government is stingy with compensation and hiring. The UCP feels that public sector workers are unrealistic. It’s a clash of values and so far, the government is winning.

While Budget 2022 announced 850 new FTEs in health and 107 FTEs in education, total spending on public sector compensation has grown by a scant 1.57% over four years and the size of the core public service has fallen seven per cent between 2018-19 and 2021-22, a point that will go over well with UCP supporters.

5.  Build, Back ‘Berta’

Few Albertans have been to La Crete, for good reason. The hamlet is 700 kilometres north of Edmonton. It gets a mention the Budget 2022 capital plan because the community will receive funding for the La Crete Maternity and Community Health Centre. The capital plan is more than roads, bridges and schools, important as those are. The capital plan allocates $320 million to build out a high-speed network for rural broadband. The Blood Tribe reserve gets a new addictions recovery centre. The Calgary Medical Examiner’s office will get a new building. There is a separate capital program for the Alberta Surgical Initiative. For specifics check pages 17 and 18 of the Fiscal Plan 2022-2025 overview. The government budgets $20.2 billion over three years for capital spending, which it forecast will create 19,000 jobs and which will be governed by the new Infrastructure Accountability Act.  

6. A Private Sector Prescription for Alberta’s Health Care Woes

It should come as no surprise that Alberta announced record spending on healthcare in Budget 2022, adding an additional $600 million dollars. The COVID-19 pandemic taught us that our healthcare system lacked capacity. The new funding means new hospitals, more continuing care spaces, retaining and recruiting rural physicians, and more opportunities for enterprising surgeons. The government will lean on chartered surgical facilities to perform thousands of procedures delayed by the pandemic.  

7.  Little Relief for Albertans is a Political Risk for the UCP

High prices at the pump. Inflation at 5%. Electricity bills skyrocketing. Alberta consumers are feeling the squeeze and Budget 2022 provides little relief. Electricity prices can sink governments (hi former Ontario Premier, Kathleen Wynne). In Alberta, those prices are spiking now. The government is promising a natural gas rebate program to help besieged families...but the program won’t start until next winter and only apply if natural gas prices rise to $6.50 per gigajoule (current market rates are $4.20-4.50). If there’s a political risk with this budget – it's the arguable lack of action on affordability issues – which may wipe the good-news surplus headline from the top of the page faster than you can swear when you open your utility bill.

8.  What Does Rachel Notley Have to Say?

In a Facebook live minutes after Minister Toews tabled the budget, NDP Leader Rachel Notley began scrutinising the UCP’s budget. A budget surplus is great and all - but where is the support for everyday Albertans she asks? With no natural gas rebates announced for the current winter, Notley questions if the rebate proposed for the following year will ever come? Among concerns around the rising cost of living the NDP has also sounded the alarm around the trend towards privatizing both healthcare and education. All of this to say that Rachel Notley is gearing up for an Election in 2023…

9.  Big City Mayors “Less Than Impressed”

Alberta’s big city mayors are big mad at the provincial government over budget 2022. Edmonton’s Mayor Amarjeet Sohi suggested to reporters that the UCP government is ignoring his city because it is represented predominately by NDP MLAs. The mayor said he has tried to reset relations with the province since being elected last fall. It seems the reset didn’t take. He says the UCP’s new budget is “a slap in the face.” Expect frosty relations between the province and the mayor of the NDP-repped capital city through 2022.

Calgary’s Mayor Jyoti Gondek was on the hunt for matching dollars for the City’s $255 million downtown revitalization effort. The province gave $5 million in the budget. “I suppose our request for matched funding means two per cent,” Gondek told reporters.

Grab some popcorn. It’s likely that Alberta's progressive big city mayors will be increasingly critical of the UCP government as the provincial election nears.

10. The Tone on ESG and Net-Zero Continues to Shift 

Less than two years ago, Premier Jason Kenney seemed skeptical of the ESG movement. Today he’s a believer. What the premier and the resource extraction sector now realize is that meeting Environment, Social, and Governance standards is table stakes for attracting Bay Street and Wall Street financing and investment. Budget 2022 refers to ESG 36 times. It’s a similar story with “net-zero” which makes its debut in the budget documents. It’s good politics too. Recent polling shows growing support in Alberta for a transition to renewable energy and a responsible approach to climate change, even as Albertans enjoy the high living standards afforded by oil and gas production.

11. A Clean Hydrogen Centre of Excellence is Getting Both Capital and Operating Dollars

Is the Clean Hydrogen Centre of Excellence a real building? It seems so. Details are scant but Budget 2022 sets aside $10 million in capital funding for the new centre and $10 million for operating funding. Hydrogen production and export has enormous potential. The market could be as much as $2.5 trillion annually by 2050 and Alberta can produce hydrogen more cheaply than any country in the world except, ahem, Russia, and they may struggle with meeting ESG standards.      

12.  Banking on CCUS and the Feds to Step Up Support

Carbon Capture Utilization and Storage (CCUS) is the process of capturing carbon from large emission sources like gas-fired power generation or oil and gas operations. Captured carbon is compressed and transported by pipeline, ship, rail or truck to be used in a range of new applications (utilization), or injected into deep geological formations (storage). Alberta has both favourable geological formations to store carbon and the technical knowhow to utilize it to create new products.

CCUS is the key technology, but not the only one, that the big oil sands players are banking on to help reach net-zero by 2050 goals. The Alberta government identified CCUS and hydrogen as key technological priorities moving forward but also noted that the federal government must support the technology in its upcoming budget through an CCUS Investment Tax Credit.

Alberta is requesting a 60-75% refundable tax credit from Ottawa that would incent up to 50 megatonnes of carbon capture per year to kickstart the drive to a net-zero oil and gas industry in Alberta. 

13.  Petrochem Sector is Key Priority of Energy Diversification

After years of critics claiming that Alberta should process more of our natural resources at home, Alberta is quietly becoming a leader in petrochemical manufacturing, which often involves using natural gas to produce products like polypropylene, or ammonia. According to the budget documents, manufacturing became a “driving force” in the economic recovery of 2021. Over the last twenty years several new plants have been announced for communities like Joffre, or Alberta’s Industrial Heartland, located near Edmonton. The most exciting of the latest announcements must be Northern Chemical’s carbon-neutral plant at Grande Prairie, with construction starting in 2023. This is great news for Alberta’s ESG reputation, but as importantly petrochemical manufacturing helps lessen the provinces reliance on high commodity prices to produce prosperity.

14. Harvesting Timber and Crops

Agricultural and forestry form part of the bedrock of the Alberta economy. Farmers and ranchers also have inordinate political clout. In his speech today, the finance minister noted that agriculture was getting its share of the billions in new private sector investment in Alberta. Agriculture will also get some of the $170 million set aside for enrolment seats in sectors experiencing skill shortages. 2021 was an especially bad year for farmers and ranchers, prompting $2.8 billion dollars in extraordinary payouts to cover losses due to drought.

15. Charters, Charters, Everywhere, and...

Premier Kenney is a big supporter of choice in education. He made his support tangible with $47 million in charter school capital spending in Budget 2022, and another $25 million in operating spending. 

Post-secondary institutions also got a nod. The University of Calgary will receive $59 million to expand its Veterinary Medicine Program. SAIT gets $41 million for the redevelopment of the John Ware Building. Mount Royal University and the University of Alberta will get $45 million and $56 million respectively to update facilities.

16. Museums, Auditoriums and Zoos, Oh My!

Spending is up on culture in Budget 2022, thanks to a significant injection of funds into the Community Facility Enhancement Program (CFEP). Funds for this popular program will more than double over the next year, but priority goes to projects that are “shovel ready” and that create lots of jobs. The CFEP Grant application intake will begin as early as July 2022.

Recent beneficiaries of the program include the Calgary Zoo, the Canmore Nordic Centre, and the highly publicized revitalization of the Glenbow Museum.

17. Looking to the Cloud for Answers

The government is betting heavily that technology can solve some of the toughest problems governments face, such as providing better heathcare and tackling climate change. The great side benefit is that it also creates those sexy, sustainable, headline-grabbing, hi-tech jobs. Budget 2022 mentions technology more than 60 times in the pages of the fiscal plan. For instance, the TIER Fund, paid for by Alberta’s heaviest emitters, allocates $421 million to support carbon capture, methane emission reduction, and clean energy technologies. Post secondaries offering programs that train technology workers receive new money too. Funding for rural broadband ensures that we can get lost in the metaverse no matter where we live in Alberta.

18. How are Indigenous Albertans doing in Budget 22?

The pandemic amplified inequalities in Alberta. Some groups were impacted more, including Indigenous people, women, and persons with disabilities. The economic recovery plan is supposed to address some of these inequalities. Under the Employment Partnership Program, $5 million is dedicated to increase training and reskilling for indigenous groups and another $8 million will go to the Alberta Indigenous Opportunities Corporation to support Indigenous investment in natural resource projects which will benefit the province.

19. World Cup bid in extra time, but will province come out to play?

The City of Edmonton’s bid to co-host the 2026 FIFA World Cup gained some traction over the year as Canada’s Men's Soccer Team elevated the “beautiful game” to another level with an undefeated qualifier run. Commonwealth Stadium played host to 50,000 fans for a brutally cold but uniquely Canadian match last November. Edmonton is hoping to replicate that magic in a big way a few years from now, but it remains to be seen if the province will support the city and the federal government in a bid. Budget 2022 was silent on the event, and Minister Toews reportedly played coy in budget lockup, simply stating that no decisions have been made on the bid. The clock continues to tick.

20.  Rural Revolt Likely to Subside with Ending of COVID Restrictions?

The first great popular revolt in English history was Wat Tyler’s Peasant’s Revolt of 1381. When the government introduced a poll tax in 1380, Tyler led a group of peasants to London where they massacred a group of Flemish merchants and burned down a perfectly good castle. King Richard II was forced to negotiate, and the poll tax was withdrawn. If you know your Shakespeare, you know that inattentive leadership eventually catches up with Richard. Now, fast forward 640 years. Instead of a poll tax the issue is vaccine mandates. Instead of torches and pitchforks truckers menaced provincial and federal governments with semi-trailer trucks, interesting theories about deposing elected officials, horn honking and, at least in Coutts, threats of violence against police officers. With Covid restrictions almost certain to lift next Tuesday in Alberta, it seems likely that the anger that drove the protests will begin to dissipate but the threat has not disappeared. The spirit of Wat Tyler lives on in great stretches of rural Canada, including in rural Alberta, or ‘Berta’ as it is sometime known.

21. The tale of Larry the Pipefitter - A Lesson on Reskilling and Retraining 

Governments love a good anecdote. If you watched the budget speech, you’ll know that “Larry”, a pipefitter for over 30 years, loses his job in the downturn of 2020, becomes socially isolated and despairs at not being able to provide for his family. Then, riding a wave of new investment and opportunity in Alberta, Larry is called back to work, and he is super excited. He’s back to his old schedule of 10 days working and 5 days off. The end.  The moral of the story is that Budget 2022 reaffirms the government’s 2019 platform commitment to opportunity and creating good jobs.

The budget announced several initiatives to get Albertans back into the workforce. Significant funding will go to career opportunities in sectors experiencing skill shortages, such as tech, ag, health, aviation, veterinary medicine, and the trades.

22. Taxes, Levies, and Fees

Every budget catches a few Albertans by surprise, and this one is no exception. AirBnB-style accommodations will soon have to begin collecting and remitting tourism levies to the province. Provincial park booking fees rise from $5 to $10. Income tax brackets remain de-indexed, but Minister Toews has expressed a desire to return to indexing once the fiscal challenge has passed. And the smokeless tobacco enthusiast will be relieved to know that the tax rate on his beloved chew will fall by 13.75 cents per gram to prevent tax leakage to Saskatchewan. What a relief.