St. John’s (NL), Halifax (NS), and Calgary (AB) – Provincial governments should begin examining what can be done to improve the stewardship of resource revenue in Atlantic Canada, a paper released today by the Atlantic Institute for Market Studies (AIMS) says.
Co-authored by Senior Fellow, Robert Roach, Research Associate, Jeff Collins, and AIMS President and CEO, Marco Navarro-Genie, the paper – A Good Problem to Have: Lessons for Atlantic Canada from Alberta’s Experience with Natural Resource Revenue– calls for stability in Atlantic Canada’s strategy to transform non-renewable resources into a permanent financial asset.
“There is much to learn from Alberta’s checkered history of resource development and savings that can be applied right here in Atlantic Canada,” says Navarro-Genie. “There is an intergenerational opportunity to have this conversation today and clearly pave a smart, strategic course of action that allows citizens today and the generations of tomorrow to benefit.”
According to Rob Roach, time is of the essence, especially in light of recent world oil price fluctuations that have wreaked havoc on Alberta’s and Newfoundland’s economies. “When oil prices are high, you have large surpluses that are difficult to spend wisely on the fly. When prices are low, you have a budget hole that has to be rapidly filled by a haphazard combination of debt, cuts or higher taxes,” he adds.
“There are excellent examples of managing resource revenue in jurisdictions such as Norway and North Dakota,“ said Jeffrey Collins, “from which jurisdictions such as Newfoundland and Labrador could learn a good deal.”
Key findings in the report highlight the value of creating a permanent fund where 100 per cent of non-renewable resource revenue is saved that in turn then generates earnings in perpetuity. The report also recognizes the potential challenge of public support for an aggressive savings program, and concludes that provincial referenda after a rich public debate are essential to any saving plan’s success.
“This will not be an easy sell, and we recognize that,” contends Navarro-Genie. “But our job as one of Canada’s leading think tanks is to stimulate open, relevant discussion in a region where we have an opportunity in time and circumstance to get it right.”
The report calls on provincial governments to adopt the following six measures:
1. Save 100 per cent of resource revenue with only the earnings available for operational or capital expenses.
2. Inflation proof the saving fund’s principal.
3. Use the earnings to retire provincial debt before using it for other purposes.
4. Once out of debt, do not think of the saved revenue as a rainy day fund. Decide what the fund’s income will be used for, begin using it and provide regular reports to the public.
5. Defer the use of the saving fund’s annual earnings until the following year (i.e., have the earnings in the bank before incorporating them into the provincial budget).
6. Put the savings plan before a citizens’ assembly for review. Submit the recommendations of the assembly to a binding provincial referendum.
According to the authors, by following these lessons, Newfoundland and Labrador could pursue a course that sees the province’s resources pay off for decades to come. Likewise, by taking a similar path in the future, New Brunswick and Nova Scotia—provinces that have yet to develop their energy resources to the fullest—would have the opportunity to initiate savings programs before falling into the unsustainable practice of spending resource revenue as it comes in.
To read the entire study, please click here.
For more information and to arrange for interviews, please contact:
Phone: 587-999-0592 (for Alberta)
Phone: 902-393-8162 (for Newfoundland and Labrador)
Phone: 902 249 1143 x225
The Atlantic Institute for Market Studies is a Canadian non-profit, non-partisan research institute that provides a distinctive Atlantic Canadian perspective on economic, political, and social issues. The Institute seeks to stimulate public debate with well-considered argument and evidence-based data. AIMS sets the benchmark on public policy by drawing together the most innovative thinking available from some of the world’s foremost experts and applying that thinking to the challenges facing Canadians.