Think tank says Alberta should save $15 billion a year to avoid future cash crunch

The report released Thursday by the Toronto-based think-tank says the province should save the equivalent of $4,500 a year for every Albertan - or about $15 billion annually.

This is far more than the roughly $2 billion a year the province has been saving and even more than the $12 billion in energy revenues the province is projecting to rake in this year.

Economists Leslie Shiell and Colin Busby say in their report that many Albertans are asking whether the province has saved enough for the future.

"This question has taken on particular importance in light of recent media reports about the successful example of Norway, an oil-rich country that places more emphasis on saving its resource revenues than Alberta," they say in the report.

Finance Minister Iris Evans said the report appears to endorse Alberta's savings strategy but suggested that some of the advice may be included in the province's new investment strategy.

But Evans blanched at the report's comparison of Alberta's savings policy with what Norway has been doing with its resource wealth.

"Norway has a 25 per cent sales tax and 55 per cent personal income tax," she said. "What we have in common with Norway is a resource-based economy, but the taxation structure is really quite different."

Alberta has taken a more balanced approach, using resource revenues to pay for high quality education and health care systems as well as keeping taxes low, a department official said.

Alberta became the first debt-free province in 2004 after using windfall energy revenues to pay down roughly $28 billion in provincial debt. The province has also saved roughly $7 billion since then in trust accounts and endowments, including the Heritage Fund which is now valued at $17 billion.

The Alberta government currently has a policy that requires two-thirds of any unanticipated budget surplus to go towards building projects, while one-third goes into savings. Last year's budget surplus was $4 billion, the 14th surplus in a row for the province.

The province has already set up the Alberta Investment Management Corp. with $75 billion in savings from pension funds, the Heritage Fund, and the Capital Fund.

The government has also been spending billions on a backlog of building projects that languished while the focus was on paying off the province's debt.

Tens of thousands of new residents pouring into Alberta have also caused dramatic increases in health care and education costs and dozens of new schools and several health facilities are being built to keep pace with the growing population.

Alberta's total revenues are forecast at $38 billion this year, while spending is pegged at $37 billion.