Alberta
Fraser Institute says Albertans should get annual dividend to promote Heritage Fund
From the Fraser Institute
By Tegan Hill and Joel Emes
An Alberta Dividend: The Key to Growing the Heritage Fund
If the government of Alberta wants to build the Heritage Fund over the longer term, it should start paying dividends to Albertans, finds a new study published today by the Fraser Institute, an independent non-partisan Canadian think-tank.
“The Alberta government has promised to ‘re-build’ the Heritage Fund, but it will require a consistent commitment over the long term,” said Tegan Hill, director of Alberta Policy at the Fraser Institute and co-author of An Alberta Dividend: The Key to Growing the Heritage Fund.
In 1976, the province established the Alberta’s Heritage Savings Trust Fund to save a share of the province’s resource revenues to provide ongoing benefits to Albertans. Since its creation, however, resource revenue contributions have only been made in 11 of 48 years of the fund’s existence and just 3.9 per cent of total resource revenue has been deposited to the fund over its lifetime.
Learning from Alaska’s success with its resource revenue savings fund—the Alaska Permanent Fund—the study proposes that Alberta should introduce a dividend to provincial residents to create public buy-in that generates political pressure to adhere to fiscal rules around the Heritage Fund’s operation—such as consistent resource
revenue contributions and inflation-proofing of the fund’s principal—to ensure its growth over time.
For perspective, the Permanent Fund was started the same year as Alberta’s Heritage Fund but has grown to US$78.0 billion in 2022/23—or C$88.6 billion—compared to a balance of just C$19.0 billion in Alberta’s Heritage Fund.
Using two alternatives based on Alaska, which includes mandatory 25 per cent resource revenue contributions and consistent inflation proofing of the fund’s principal, the Heritage Fund has the potential to pay each Albertan a total of $571 to $1,108 in dividends over the next three years—equivalent to $2,284 to $4,430 per family of four.
Under these rules, the Heritage Fund would be worth between $35.8 billion and $38.7 billion by 2026/27, while paying out between $2.9 billion to $5.5 billion in dividends to Albertans.
“As demonstrated in Alaska, by giving citizens an ownership share in the state’s resource fund, they demand that sound rules regarding the governance of the fund be adhered to.” said Hill.
- The Smith government has promised to “re-build” the Heritage Fund so that eventually its earnings are significant enough to replace volatile resource revenue in the budget. While this is a worthy goal, it will require a long-term commitment.
- Building on work from Hill, Emes, and Clemens (2021), this bulletin uses Alaska’s success with its resource revenue savings fund—the Alaska Permanent Fund—to demonstrate how the Smith government can introduce new fiscal rules to ensure growth in the Heritage Fund with a focus on the annual dividend.
- As demonstrated in Alaska, by giving citizens ownership shares in the state resources, they recognize their vested interest and demand that the state maximizes returns from such resources. Put simply, by creating public buy-in, the dividend generates political pressure to enforce robust fiscal rules around the fund’s operation to ensure its growth.
- Using two illustrative models based on the Alaska Permanent Fund, which includes mandatory 25 percent resource revenue contributions and consistent inflation proofing of the fund’s principal, each Albertan could be paid an estimated $148 to $297 in dividends in 2024/25, equivalent to $594 to $1,187 per family of four. From 2024/25 to 2026/27, each Albertan could receive a total of $571 to $1,108 in dividends, equivalent to $2,284 to $4,430 per family of four.
- Under these rules, the Heritage Fund would be worth between $35.8 billion and $38.7 billion by 2026/27, while paying out between $2.9 billion to $5.5 billion in dividends to Albertans.
Authors:
From the Fraser Institute
By Tegan Hill
According to last week’s fiscal update, the Smith government recorded a $8.3 billion surplus in 2024/25—$8 billion more than what the government projected in its original 2024 budget. But the good times won’t last forever.
Due largely to population growth, personal income tax revenue exceeded budget projections by $500 million. Business tax revenue exceeded budget expectations by $1.1 billion. And critically, thanks to relatively strong oil prices, resource revenue (e.g. oil and gas royalties) saw a $4.7 billion jump.
The large budget surplus is good news, particularly as it will be used to pay down government debt (which taxpayers must ultimately finance) and to invest for the future. But again, the good times could soon be over.
Recall, the Alberta government incurred a $17.0 billion budget deficit just a few years ago in 2020/21. And it wasn’t only due to COVID—until the recent string of surpluses, the government ran deficits almost every year since 2008/09, racking up significant amounts of debt, which still largely persists today. As a result, provincial government debt interest payments cost each Albertan $658 in 2024/25. Moreover, in February’s budget, the Smith government projected more deficits over the next three years.
Generally, Alberta’s fiscal fortunes follow the price of oil. Over the past decade, for example, resource revenue has been as low as $2.8 billion in 2015/16, while oil prices slumped to $US45.00 per barrel, and as high as $25.2 billion in 2022/23, when oil prices jumped to $US89.69 per barrel.
Put simply, resource revenue volatility fuels Alberta’s boom-and-bust cycle. In 2025/26, the West Texas Intermediate oil price will be a projected $US68.00 per barrel with projected resource revenue falling by $4.9 billion year-over-year.
But oil prices don’t need to dictate Alberta’s fiscal fortune. Indeed, if the Smith government restrains its spending, it can avoid deficits even when resource revenues fall.
There are plenty of ways to rein in spending. For instance, the government spends billions of dollars in subsidies (a.k.a. corporate welfare) to select industries and businesses in Alberta every year despite a significant body of research that shows these subsidies fail to generate widespread economic benefit. Eliminating these subsidies is a clear first step to deliver significant savings.
The budget surplus is undoubtedly positive for Albertans, but the good times could soon come to an end. To avoid deficits and debt accumulation moving forward, the Smith government should rein in spending.
Tegan Hill
Director, Alberta Policy, Fraser Institute
Sat Parhar has been appointed as the first chief of the Independent Agency Police Service, marking the next step toward a new municipal policing option.
The appointment of a new chief for the Independent Agency Police Service (IAPS) marks the next step in giving municipalities a new option for local policing and builds on the work already underway for the agency to assume the police-like duties currently carried out by the Alberta Sheriffs. The IAPS will empower municipalities to adopt strategies that effectively respond to their specific safety concerns, enhancing public safety across the province.
Chief Parhar brings more than 25 years of policing experience, including senior roles with the Calgary Police Service, most recently as deputy chief. His frontline policing experience and deep understanding of Alberta’s complex and diverse public safety landscape positions him to lead the agency as it takes shape and begins its work as a new municipal policing option, keeping communities safe.
Once operational, the agency will strengthen Alberta’s existing policing model and complement the province’s current police services, which includes the RCMP, Indigenous policing services and municipal police. It will help fill gaps and ensure law enforcement resources are deployed efficiently to meet Alberta’s evolving public safety needs and improve law enforcement response times, particularly in rural communities.
“Appointing Chief Sat Parhar is a key milestone in Alberta’s plan to give municipalities a real choice in how their communities are kept safe. This is about building a modern police service that reflects the priorities of Albertans, strengthens local decision-making, and ensures every corner of our province, especially rural areas, can count on responsive, effective law enforcement. With his decades of experience and deep understanding of Alberta’s policing landscape, he is the right leader to bring this vision to life.”
“This appointment signifies a significant step forward in our efforts to establish a more robust, community-focused policing model that is better equipped to meet the unique needs of our local residents. Under Chief Parhar’s visionary leadership, we are confident that we will develop a modern, efficient police service that not only enhances public safety but also aligns closely with the priorities and values of Albertans. His experience and commitment are vital in shaping an IAPS that is responsive, transparent, and dedicated to fostering trust and collaboration within the community, ultimately ensuring a safer and more connected society for all.”
Chief Parhar’s immediate priorities will be to hire an executive team and commence organizational planning such as developing key recruitment, training and other operational policies. Chief Parhar’s appointment is the first step of many to establishing the IAPS.
“It’s an honour to take on this role and help shape a modern police service built for Alberta. My focus from day one will be on setting high standards for professionalism, building strong relationships with our partners and ensuring this service reflects the needs and priorities of the communities we serve.”
The Independent Agency Police Service was formally created through regulation following the passing of Public Safety Statutes Amendment Act, 2024. The agency will operate as an independent Crown corporation, and will be renamed the Alberta Sheriffs Police Service, with its head office located in Calgary. The IAPS will be operationally independent from the provincial government with civilian oversight, consistent with all police services in Alberta.
“When it comes to policing, municipalities like ours deserve a choice – especially when the current system leaves us disadvantaged simply because of our size. We look forward to learning more about what that alternative will look like once an Alberta police agency is fully established and the options are clear. For us, this is about fairness, sustainability, and ensuring municipalities have access to policing solutions that reflect both their needs and their realities.”
Quick facts
- The regulation establishes the IAPS Provincial Corporation and its governance structure including board of directors, board of director powers, financial responsibilities and accountabilities.
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- Expanding municipal police service options (April 7, 2024)
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