Quick Links – Budget Address | Fiscal Plan 

On Feb 25th,, Finance Minister Travis Toews tabled their government’s third budget – Protecting Lives & Livelihoods; a three year fiscal plan for Alberta. The budget is broken into three thematic areas: (1) Investing in Health Care, (2) Preparing for Recovery, and (3) Maintaining Responsible Spending. .For this year, the 2021-22 budget predicts a deficit of $18.2 billion and debt ballooning to a record $115.8 billion by the end of the fiscal year, as the province continues to recover from the COVID-19 pandemic and low oil prices. However, we see that deficits will continue in Alberta for at least the next few years – $11 billion and $8 billion for 2022-23 and 2023-24 respectively. 

Cannabis 

• Generally speaking,  tax revenue is down $478 million, likely due to reduced consumption and activity. It was noted directly in the budget that these declines are slightly offset by increases in cannabis tax revenue. 
• Tobacco tax revenue continues to trend down, from lower consumption, while the introduction of a new tax on vaping products, proposed for 2020-21, was put on hold. Other taxes also include Alberta’s cannabis tax revenue, which was a revenue source that increased in 2020-21. It is forecast at $100 million, $26 million greater than budget, and continues to increase, to $111 million by 2023-24.
• Alberta Gaming, Liquor and Cannabis Commission (AGLC) 2020-21 net income from gaming and lottery activities fell dramatically as casinos and other venues were shut down or had limited access for most of 2020 and early in 2021. Net income is expected to be $527 million, or 38 per cent lower than budget. With successful mass vaccination, gaming revenue is forecast to recover relatively quickly and grow by an average of 8.6 per cent between 2021-22 and 2023-24, to $1.5 billion. AGLC liquor and cannabis net income increased from budget in 2020-21, unlike most other revenue streams, but the forecast assumes relatively modest growth to 2023-24, aided by decreasing costs of operations. 
• Net income for cannabis includes retailer fees and sales revenue, less costs for administration and purchasing inventory, and is expected to remain negative for the next three years, as set-up, administration and inventory costs exceed revenue.

Treasury Board and Finance 

• The Ministry of Treasury Board and Finance coordinates government-wide budgeting, reporting, financial management and economic analysis. The ministry also provides policy and regulatory oversight for Alberta’s liquor, gaming, cannabis, financial securities, insurance and pension sectors.
• The ministry’s 2020-21 operating expense forecast is $1.7 billion, which reflects $41 million lower spending than Budget 2020. 

Post-Secondary Education 

• Funding to post-secondary institutions will be cut from 2019 levels ($5.47 billion) to $5.04 billion in 2021-22, and rising slightly to $5.08 billion in 2022-23 and $5.11 billion in 2023-24. The budget includes 750 lost jobs in post-secondary education.

New Business Supports: The Innovation Employment Grant 

• As part of Alberta’s Recovery Plan, the government introduced the Innovation Employment Grant (IEG). The Innovation Employment Grant encourages economic growth by supporting small and medium-sized businesses that invest in research and development across sectors.
• The IEG provides qualified corporations a refundable tax credit that is equal to 8% of eligible research and development (R&D) expenditures incurred in Alberta after December 31, 2020. 
• Qualified corporations will also be eligible to claim an additional refundable tax credit equal to 12% of eligible R&D expenditures in excess of their base amount1 of spending. 
• The IEG will replace the 10% provincial Scientific Research and Experimental Development (SR&ED) tax credit, beginning January 1, 2021.
• The three outcomes of the Technology and Innovation Strategy are:
  • Developing, attracting and retaining a future-ready workforce with skills aligned to diversify and grow Alberta’s economy;
  • Leading the country in attracting capital and investment by 2030; and 
  • Creating a competitive landscape and the right enablers to drive entrepreneurship and grow priority sectors. 

Agriculture Strategy 

• The government’s significant investment in irrigation infrastructure, in partnership with Irrigation Districts and the Canada Infrastructure Bank is a key component of this strategy. The Agriculture Strategy focuses on attracting investment for value-added and diversification of agricultural products, broadening export opportunities and an historic expansion of irrigation infrastructure.

Municipal Changes 

• Capital grants for cities and towns will increase in 2021 as part of the pandemic recovery effort, with the province distributing a total of $1.9 billion. But that funding drops to $485 million in both of the subsequent two years, when cities would have originally gotten $860 million.
• Two years ago, the UCP government disregarded the previous agreement on capital transfers for Edmonton and Calgary, replacing it with a new system that would see the cities get $455 million annually starting in 2022. The cities weren’t pleased with the change, which was a cut from an expected $500 million per year.
• That program is now being delayed and the government will keep the old system, called the Municipal Sustainability Initiative (MSI), in place until 2024.
• The province will maintain a freeze this year on the portion of municipal property taxes they take from cities, known as the education property tax. Last year’s budget was poised to increase the rate, but after COVID-19 struck, the government held it flat.
• Federal support for infrastructure includes ramping up of Alberta’s share of $3.65 billion under ICIP, partially offset by winding down of the Public Transit Infrastructure Fund and Clean Water and Wastewater Fund. Most of the ICIP Public Transit stream funding has been allocated to Edmonton and Calgary LRT projects. In 2021-22, $129 million has been allocated to municipal transportation and water infrastructure projects, including $112 million under the COVID-19 stream, leaving $0.12 billion remaining for allocation.