The best time to start saving for the future is yesterday, the second-best time is today.
That’s exactly what the Alberta government is doing with its recent announcement to increase the savings of its heritage fund. Saskatchewan should follow suit.
Alberta Premier Danielle Smith recently that she plans to grow the Alberta Heritage Savings Trust Fund to at least $250 billion by 2050. The fund is currently worth about $24 billion.
“We owe it to future generations of Albertans. The new heritage fund will lessen our dependence on natural resource revenues, diversify our economy, and create both wealth and prosperity for generations to come,” said Smith.
At $250 billion, the province could earn $12.5 billion every year in interest every year assuming a conservative 5 per cent investment return. The Alberta government is projected to in about $20 billion in non-renewable resource revenue this year.
Saskatchewan Premier Scott Moe also owes it to future generations of Saskatchewanians to save Saskatchewan’s resource revenues.
Other places are already reaping the rewards of heritage funds.
The Alaska government the Alaska Permanent Fund in the late 1960s. Since then, the state government has invested 25 per cent of its non-renewable resource revenue into the fund every year. Because of this investment, every single Alaskan receives an annual cheque from the fund. Each Alaskan $1,702 last year.
In Norway, the results are more incredible. Norway 100 per cent of its oil revenues into its heritage fund. Today, it contains more than $2 trillion. Money that is generated from the fund almost 20 per cent of the Norwegian government’s budget every year.
The Saskatchewan government has been told to start a heritage fund before. In 2013, former premier Brad Wall commissioned a on heritage funds by former University of Saskatchewan president Peter MacKinnon.
“A permanent savings account in the form of a [heritage fund] could turn our one-time revenue from these resources into a lasting source of wealth for Saskatchewan people,” MacKinnon said.
Before Saskatchewan can start a fund, it needs to deal with the debt. Any deposits that would go into this new fund should first be used to pay back the government’s $21-billion debt.
If the government of Saskatchewan listened to the Mackinnon report and started a fund in 2013, setting aside debt repayment, it contain about $3.2 billion today and would have generated the provincial government $988 million in interest over the last eleven years. That’s money the government could have used to help deal with the unpredictability of resource revenues or reduce taxes.
But there is one key warning in Alberta’s announcement that Saskatchewan should heed. The government of Alberta says that the fund also be used for “strategic investments.”
This is the wrong move, any fund that Saskatchewan starts should solely be used to save for the future and get the provincial government off the resource revenue rollercoaster. It should not be used as a corporate welfare machine to help pay for politician’s pet projects.
In the 1980s, the Alberta Government the Heritage fund to hand out taxpayer-funded loans to companies, including a paper mill and an oil upgrader. By the 1990s, it was clear that both projects were failures and taxpayers lost millions.
The Alberta NDP seem to remember this too. “We have real concerns about the heritage fund being used to invest in projects that otherwise can’t secure financing,” Alberta NDP MLA Court Ellingson.
The fund should be as far away from political hands as possible. Alaska’s and Norway’s funds are so successful because politicians are not allowed to touch the principal of the fund and only spend the interest.
Alberta’s announcement should be a wake-up call for Saskatchewan. Every year the government fails to start a heritage fund is another year wasted. The best time to start saving is now.
Gage Haubrich is the Prairie Director for the Canadian Taxpayers Federation
The commentaries offered on Â鶹´«Ã½AV.ca are intended to provide thought-provoking material for our readers. The opinions expressed are those of the authors. Contributors' articles or letters do not necessarily reflect the opinion of any Â鶹´«Ã½AV.ca staff.
