The goal to grow the Alberta Heritage Savings Trust Fund to between $250 and $400B by 2050 is ambitious. Here is how it can be done
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In February 2024, Premier Danielle Smith pledged to release a detailed plan for building the Alberta Heritage Savings Trust Fund (AHSTF) to between $250 and $400 billion by 2050. However, since then, the Alberta government has provided little information on how it intends to achieve this goal.
We know that the government has been working on some type of action plan. An initial deep dive into building up the Heritage Fund was conducted for the government by BERG Capital Management (BERG), now called the PNYX Group. And a recent Freedom of Information request I filed reveals over 225 pages of relevant records in just the last month alone related to increasing Heritage Fund assets. The PNYX Group’s report(s), along with some of the work being conducted internally by the government, should be made public so Albertans can judge the effectiveness of the developing plan.
In a previous commentary, I calculated that if the Alberta government followed a modified version of former Premier Peter Lougheed’s approach – by allocating a growing percentage of non-renewable resource revenues (NRR) to the Heritage Fund and allowing the Fund to retain all its net investment income – its assets could grow to over $355 billion by 2050. By then, annual earnings from the Heritage Fund would exceed $21 billion. And Alberta Fund assets could reach over $112 billion by 2050, generating more than $6.7 billion in annual income.
Starting with 10 percent of non-renewable resource revenues (NRR) allocated to the Heritage Fund in 2024-25, the percentage would gradually rise to nearly 50 percent by 2030-31. By 2038-39, 100 percent of NRR – around $20 billion annually – would be directed to the Heritage Fund.
While the goal of building a $250 to $400 billion Heritage Fund by 2050 is laudable, we need a clear action plan from the government to make it a reality. As we wait for the Alberta government to release its report on how it plans to grow the Heritage Fund, I propose the following seven-point action plan for revitalizing the Fund.
- Require a growing percentage of annual NRR to be allocated “off-the-top” to build up the Heritage Fund to benefit current and future generations. The goal is to allocate 100 percent of annual NRR to the AHSTF by 2040, weaning Alberta off using NRR to support current spending once and for all.
- Require all Heritage Fund investment income to be retained by the Fund, rather than being transferred to the province’s General Revenue Fund (GRF).
- Establish aspirational five-year targets for the size of the Heritage Fund and have the province’s Audit Committee report annually on progress made in meeting these aspirational targets.
- Work with the Alberta Investment Management Corporation (AIMCo) to examine investment policies and practices to smooth over some of the year-to-year volatility of Heritage Fund investment income.
- Establish an advisory body to the President of the Treasury Board and Minister of Finance, to be known as the AHSTF Advisory Council, to conduct independent research and offer advice to the government on major issues surrounding the operation of a revitalized Heritage Fund while promoting greater awareness and profile for the Fund.
- Enact comprehensive legislation under the Alberta Heritage Savings Trust Fund Act establishing clear rules for the operation of the Heritage Fund.
- Legislate a clear mandate for the Alberta Fund, including the requirement that the Fund’s year-end investment income be distributed annually to Albertans as a dividend payment, similar to what is done for Alaskans through the Alaska Permanent Fund. I estimate that if this rule were adopted, an individual Albertan would receive an estimated $1,000.00 annual dividend payment by 2050, with an Alberta family of four receiving an estimated $4,000.00 annual dividend payment by 2050.
A comprehensive action plan for the Alberta Heritage Savings Trust Fund can turn Alberta’s oil and gas resources into financial assets, creating a reliable income source as non-renewable resource revenues (NRR) decline. This action plan would reduce Alberta’s dependence on NRR and help manage spending expectations by linking costs of demands more closely to the tax contributions of current citizens, ultimately improving long-term fiscal sustainability.
The time for vague promises is over. Albertans deserve a clear, actionable plan for the Heritage Fund now – not vague commitments or hidden reports. Premier Smith’s ambitious goal of building a $250 to $400 billion Alberta Heritage Savings Trust Fund by 2050 is only achievable if the government stops delaying and starts delivering. But without transparency and a solid strategy, this opportunity to secure Alberta’s financial future will be lost. The clock is ticking, and the government needs to act before it’s too late.
Lennie Kaplan is a former senior manager in the Fiscal and Economic Policy Division of Alberta’s Ministry of Treasury Board and Finance (TB&F), where, among other duties, he examined best practices in fiscal frameworks for oil and gas-producing jurisdictions, including savings strategies for non-renewable resource revenues (NRR).
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