By Scott Jeffrey
Well, the simple answer is because they can.
When Peter Lougheed started the Fund back in 1976, he invested $2 billion as seed money, and said that his new government would commit to investing 30 per cent of the government’s take on oil and gas revenue to help grow the Fund. This would ensure the future of all Albertans when the resource ran out.
In 1983, the same government cut back its contribution to 15 per cent, and in 1987 the same government ended contributions to the Fund altogether. From that day forward, all revenues flowing from oil and gas would go directly to General Revenue Accounts, to be used by the government of the day in any way it sees fit.
How did this happen, you might ask? How could a commitment go from 30 per cent to 0 per cent in 15 years? The answer is simple. Any donation to the Fund was purely voluntary, based on the judgment of the government of the day. And despite a regime change in May 2015, all public revenue from the production of oil and gas still goes directly to the government’s coffers. With total government revenue for 2016/17 estimated at around $3 billion, and a $10 billion budget deficit, the current government is not going to be announcing compulsory contributions to the Fund any time soon.
I wrote a piece a while back about Alberta and Norway’s funds, and mentioned the differences in assets under management. Alberta has a little over $17 billion, while Norway, which started their Fund 20 years later in 1996, has a little over $1 trillion. I didn’t mention it at the time, but even Alaska has a little over $70 billion in their Fund, which was also initiated in 1976.
The major difference in the above equations is government interference. In Norway, 100 per cent of public revenue from oil and gas goes into the fund, and the government gets to draw on this fund at a set rate. Any attempt at deviation by the government of the day will lead to that government’s defeat, regardless of political stripe. Even the government of the state of Alaska, with a history of bonus cheques to every citizen (remember our one-time Klein bucks), has mandated a certain percentage of its oil and gas revenue be deposited to the Fund to make it grow. The government of Alberta has had over 40 years to make a decision that protects our Fund, and has conspicuously failed to do so.
Managing the money, we do have in the Fund is AIMco, an Alberta crown corporation formed in January 2008. Before that the Fund was run shoddily by a bunch of amateurs in Alberta Treasury, making loans to other provinces and losing money in one scheme after another. Since that time AIMco has performed admirably, making money for the government to the tune of about $315 million a year on the principal in the Fund. It gets no cash injections to the Fund, and can’t even keep the interest it earns because that too goes into general revenues. As a result, it can’t really grow the portfolio, and a bad year, which is bound to happen, can further negatively impact the Fund.
Up to this point, the money in the Fund can’t be touched, but there have been troubling signs recently that indicate the current government wants, at the very least, to stage manage the investments AIMco makes, trying to share reflected glory by intimating that the investments made by this arm’s length corporation have been engineered by the government. AIMco is also required to elect to its 11-person Board of Directors those with direct relevant financial and investment experience, and it appears that the government would like to appoint their own hand-picked individuals, experienced or not.
While the NDP have expressly denied wanting to hijack any part of AIMco’s mandate, and have said there is a need to grow the Fund, there have also been no moves to bolster the Fund’s portfolio. As said before, this will not happen any time soon. At least the Conservatives, who had the most years to put something in place, did not have the temerity to tamper with the crown corporation they created.
Instead of being proactive, the current government relies on deficit financing, ignoring the invaluable lessons of the past, and those of Norway and Alaska. They continue to take from the Fund, all the while talking about standing up for the people of Alberta, investing in their futures.
Let’s make further investment in the Fund an election issue, and institute a mindset in our own population that will cause governments to stand or fall based on how they treat OUR money in OUR Fund. Better yet, the government could do it now.
After 41 years of its existence and countless chances to enhance the Fund, do something truly groundbreaking, follow the original mandate, and enshrine an endowment to the Fund into law.
A politician not allowed access to one pocket in the public purse- now that would be revolutionary.
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