Varcoe: Recommendation from one Alberta finance minister to the subsequent: 'Don't be afraid to say no'

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Alberta’s outgoing finance minister has a number of phrases of sage recommendation for Alberta’s incoming finance minister.

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Hold the books balanced and be ready to show down your colleagues if issues get robust.

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“Don’t be afraid of growing a popularity as a minister that claims ‘No,’” outgoing finance minister Travis Toews, who can be handing off the portfolio Friday, stated in an interview.

“The finance minister can have a lonely position … You’re the one which’s in the end tasked with guaranteeing a powerful stability sheet, guaranteeing a wholesome monetary assertion and a balanced finances. Each different minister has a unique project — and each different ministry requires these assets.

“So my recommendation to the subsequent finance minister? Don’t be afraid to say no and don’t be involved if you find yourself with a popularity as a minister who says no. Meaning you’re doing all of your job.”

On Friday, Premier Danielle Smith will unveil her new provincial cupboard and political watchers can be protecting a detailed eye on who takes over the chore of overseeing Alberta’s $71-billion spending plan.

The financial outlook in Alberta this 12 months is extra buoyant than in most different provinces, though a excessive stage of uncertainty nonetheless exists.

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Rates of interest proceed to climb with Wednesday’s shocking determination by the Financial institution of Canada to push the in a single day fee up by 25 foundation factors to 4.75 per cent. It got here after inflation rose by 4.4 per cent in April, together with a 4.3-per-cent hike in Alberta, in comparison with costs a 12 months earlier.

Three separate forecasts this week all present Alberta is anticipated to report among the many highest financial progress charges within the nation in 2023 — at 2.4 per cent — however it’s considerably under final 12 months’s ranges.

On Thursday, ATB Monetary additionally projected the province’s financial system to develop by 2.2 per cent in 2024, with its forecast reflecting larger rates of interest, a dip in commodity costs and a weaker world financial system.

The financial affect tied to the Alberta wildfires up to now month, which quickly knocked out manufacturing of an estimated 300,000 barrels of oil equal (boe) per day at one level final month, is one other difficulty.

Nonetheless, the province’s inhabitants elevated throughout the fourth quarter at its highest stage because the Nineteen Eighties, whereas rising capital spending within the power sector can also be offering a carry.

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A report launched Thursday by RBC Economics says Alberta will lead the provinces, whereas the Canadian financial system grows by simply 1.3 per cent. (Each the financial institution and the Convention Board of Canada additionally challenge the province’s GDP will increase by 2.4 per cent this 12 months.)

RBC anticipates benchmark West Texas Intermediate (WTI) crude costs will common US$78.40 a barrel this 12 months.

“Count on to buckle up a bit bit, however in comparison with the remainder of Canada, Alberta is in a a lot stronger place than most different provinces,” stated RBC economist Rachel Battaglia.

Nonetheless, there are nagging questions in regards to the employment outlook as discuss continues of a potential recession in Canada. Suncor Vitality is anticipated to chop 1,500 positions by 12 months’s finish whereas pipeline large TC Vitality confirmed earlier this week that it’s eliminating an unspecified variety of jobs.

For Alberta’s subsequent finance minister, there are different challenges forward.

Costs for WTI crude traded round US$71 a barrel on Thursday, about $8 under what’s projected within the March finances. (Each $1-a-barrel drop in WTI costs over the finances 12 months will scale back provincial revenues by $630 million.)

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As nicely, the province may face higher-than-expected prices to battle wildfires and different emergencies, though the final finances put aside a $1.5 billion contingency fund for unanticipated spending.

The UCP authorities projected a $2.4-billion surplus this 12 months, and the occasion made numerous marketing campaign pledges final month, together with a $1-billion promise to create a decrease earnings tax bracket.

With new provincial laws that requires the federal government to stability its books — though it does enable for some exemptions — the strain can be on the Smith authorities to keep away from any crimson ink.

“We are able to see these surpluses dwindling proper now, given the present costs of oil,” stated Jason Leslie, chief working officer of the Alberta Chambers of Commerce.

“Now we have obtained to challenge prudently. We’re method off course.”

Whereas oil costs are down from the March finances, foreign money adjustments and a smaller-than-budgeted value low cost for Western Canadian Choose heavy oil present a counterweight to weaker crude costs.

If WTI oil costs common within the mid-$70 a barrel with a slender oil-price low cost, “I believe our income line can be simply superb,” stated Toews, who completed second to Smith in final 12 months’s UCP management race and didn’t run in final month’s provincial election.

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But, the distinction between a finances surplus and deficit isn’t a large one.

“The road just isn’t extremely thick. We arrange a $1.5-billion contingency, partially to cope with unanticipated prices, but additionally to offer a bit little bit of buffer,” stated the one-term MLA for Grande Prairie-Wapiti.

“If WTI costs proceed to languish round $70 and even additional weak point, if we proceed to should combat forest fires on the fee we’ve been combating all of them summer time, and if we have now a higher-than-average crop insurance coverage … there’s little doubt this subsequent authorities could have some robust choices to make so as to get the finances balanced.”

That’s why it’s essential for the subsequent finance minister to give attention to issues inside their management, equivalent to value self-discipline and positioning the province to be aggressive for funding, stated Toews, who doesn’t anticipate an extra profession in politics.

And, he added, be ready to say no, even when situations enhance.

“It’s just one minister’s job to stability the finances and handle responsibly from a fiscal standpoint — that’s the finance minister’s.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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