Due largely to a record high windfall in resource revenue—worth an expected $28.1 billion in 2022/23—Alberta is projected to run a $12.3 billion  budget surplus in 2022/23 with additional surpluses anticipated over the  next two fiscal years. History has shown that spending these surpluses only  leads the province back into deficits when resource revenues inevitably  decline, which sets the province up for hard times down the road. Instead  of wasting this extraordinary opportunity by spending away the temporary  surpluses, the provincial government could use them to improve Alberta’s finances and economy for the long-term. This essay series presents three such  options, all of which are preferable to spending away the windfall. 

University of Calgary economist Trevor Tombe suggests the provincial government consider using the surpluses to eliminate the province’s  debt. Professor Tombe argues that debt elimination is an attractive option  as for the first time in well over a decade government borrowing rates are  projected to exceed the expected return on investment savings. In other  words, the cost of provincial debt (estimated by long-run bond yields) is  expected to exceed the return on investments (such as those in the Alberta’s Heritage Savings Trust Fund). Given mounting global economic  and geopolitical risks, the financial gains from lowering debt—in the form  of reduced interest payments for Albertans—provide welcomed certainty  where financial investments may not. Professor Tombe finds that if the  provincial government holds growth in program spending to its plan in  Budget 2022 (updated for 2022/23 in its first quarter update) and to inflation and population growth thereafter, Alberta could eliminate its debt by  2030. Eliminating provincial debt within a decade could save nearly $20  billion in cumulative interest costs by 2030, costs that Albertans are ultimately responsible for paying.