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By: Tegan Hill
The Smith government recently shared its plan to build up Alberta’s Heritage Fund to $250 billion by 2050, to purportedly wean Alberta off the resource revenue rollercoaster. Unfortunately, while its crucial to grow the fund, the government’s plan lacks robust rules to safeguard the fund and ensure its growth over the long term.
The Alberta government created the Heritage Fund in 1976 to save a share of the province’s resource revenue, including oil and gas revenues, for the future. Since its creation, however, governments have deposited just 3.9 per cent of total resource revenue in the fund over its lifetime.
In other words, for decades successive Alberta governments have missed a golden opportunity. By depositing a share of resource revenue in the Heritage Fund, the government can transform a onetime (and extremely volatile) revenue source into a financial asset that can generate more stable earnings over time. Eventually, annual earnings from the fund can be used to replace resource revenue in the budget. But for that to happen, the government must have a sustainable plan to grow the fund.
The Smith government’s new plan does not meet this standard. While the government plans to reinvest all investment returns generated by the Heritage Fund in the fund and invest a portion of any budget surpluses in the fund, these rules are based in “statutory” law that the government can easily and unilaterally change at any time. For the fund to reliably grow, the fund’s rules must be “constitutional,” which means they are more difficult to violate or eliminate.
Consider this. When the Alberta government created the Heritage Fund in 1976, it established a statutory rule that the government must deposit 30 per cent of resource revenue into the fund each year. That quickly fell to 15 per cent by 1982/83, and the government eliminated the rule entirely in 1986/87. Again, statutory rules can be changed or disregarded when they’re no longer convenient. Premier Smith clearly recognizes this risk, stating that growing the Heritage Fund will “take political will over a long period of time.”
Now consider Alaska’s permanent fund, which the state government created the same year (1976) but is worth nearly US$80 billion (roughly C$115 billion) compared to the Heritage Fund’s C$25 billion in 2024/25. Alaska’s fund operates under robust constitutional rules, and according to Alaska’s constitution, the state government must deposit at least 25 per cent of all mineral revenues into the fund each year.
If the Alberta government followed Alaska’s lead and sought to create constitutional rules for the Heritage Fund, the government would first present the rules to Albertans via referendum. Assuming the proposal passed, the Alberta government would then pass legislation recognizing the rules and present this legislation to the federal House of Commons and Senate for recognition, resulting in a change (pertaining to Alberta) in the national Constitution. Then, to reverse the rules or otherwise ignore their requirements would mean a future Alberta government would need to reverse each step in this process including a new referendum. Clearly, constitutional rules would provide far more protection for the Heritage Fund than statutory rules.
The Smith government wants to grow the Heritage Fund, which is the right thing to do. But statutory rules have failed to grow the Heritage Fund thus far—and there’s no reason to expect a different outcome this time. Instead, Albertans needs constitutional rules to ensure the Heritage Fund’s growth.
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