Alberta Heritage Savings Trust Fund
The Alberta Heritage Savings Trust Fund is a sovereign wealth fund established in 1976 by the Government of Alberta under then-Premier Peter Lougheed. The HSTF had three objectives: "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans." The HSTF operates under the Alberta Heritage Savings Trust Fund Act and provides "prudent stewardship of the savings from Alberta's non-renewable resources by providing the greatest financial returns on those savings for current and future generations of Albertans." The Heritage Savings Trust Fund used oil revenues to invest for the long term in such areas as health care, education and research and as a way of ensuring that the exploitation of non-renewable resources would be of long-term benefit to Alberta. As of 2012, the fund was invested in stocks, bonds, real estate and other ventures, with the aim of generating revenue for the province.
Between 1980 and 2014, although non-renewable resource revenues in Alberta generated almost $190 billion, the value of the Heritage Fund in 2014 was only $17.3 billion. After 1987, NRR was no longer added to the Heritage Fund. By 2009, after losing $3 billion in the markets, the value of the Heritage Fund had dropped to $14 billion, which was its value in 1985. The Alberta's Heritage Savings Trust Fund was worth $17.5 billion as of March 31, 2014 according to the Alberta government's 2013-2014 annual report. According to the 2018-19 annual report, the "fair value" of the Fund was $18.2 billion on March 31, 2019.
History
Initially, the fund received 30 per cent of Alberta's non-renewable resource royalties. Over time, successive Conservative governments propped up dubious ventures in domestic sectors ranging from forestry to aviation and food processing.During the early 1980s, the fund made loans to other provincial governments in Canada. Later the fund's money was used for capital infrastructure projects. After 1987, Alberta's non-renewable resource revenues were no longer added to the Heritage Fund. In 1983, $25.5 million from the AHSTF was used to build the Kananaskis Country Golf Course to diversify Alberta's economy while Premier Peter Lougheed was in office.
During the late 1980s and 1990s, the view emerged that government "should not be in the business of business" and should not be so actively engaged in shaping the future. The Alberta Heritage Savings Trust Fund was shifted away from strategic business investments to become a savings tool investing for financial return. Investment into the fund was halted in 1987.
Ralph Klein, who was Alberta Premier from 1992 through 2007, used the HSTF to fund special projects to encourage economic diversification. During the mid-1990s, public opinion turned against allowing governments to dip into the Heritage fund to fund special projects, and instead all income earned each year began to be withdrawn from the fund and added to general revenues.
Alberta Investment Management Corporation
The Alberta Investment Management Corporation, a Crown corporation owned by the provincial government, is responsible for managing the assets of the HSTF. Prior to 2008, the assets of the fund was managed directly by the Alberta Ministry of Finance.Council for Economic Strategy 2011
In its May 2011 report, entitled Shaping Alberta's Future, Premier Ed Stelmach's Council for Economic Strategy proposed the institution of a "Shaping the Future Fund to ensure that money produced by converting natural assets today is invested with intentionality to secure prosperity for future Albertans."The flagship idea of the Council was,
Fiscal Management Act 2013
In 2013, the Fiscal Management Act "committed the government to saving a portion of its non-renewable resource revenues for the future."Criticisms
In their August 2015 contrast for The Globe and Mail between the AHSTF and the Norwegian Government Pension Fund Global, Brian Milner and Jeff Lewis wrote that Norway parks 100 per cent of its non-renewable resource revenue from royalties and dividends in a fund that is barred from investing a krone in the domestic economy.Reports by the Canadian Centre for Policy Alternatives and the Fraser Institute concluded that Alberta should be saving more of its non-renewable resource revenues. Since 1980, the NRR in Alberta has generated almost $190 billion, but the value of the Heritage Fund was only $17.3 billion in 2014. After 1987, NRR was no longer added to the Heritage Fund. The Fraser Institute report compared the Alberta Heritage Fund to Norway and Alaska's NRR funds and argued that Alberta's was significantly "smaller than others because of its relative under-funding and chronic withdrawals of most income from the fund." Alaska for example continued to deposit 25 percent of its NRR from 1982- 2011 and Norway contributed 100 percent. If Alberta had followed the Alaskan formula, by 2011 the Heritage Fund would have had $42.4 billion instead of $9.1 billion. By the Norway rules, Alberta would have had $121.9 billion by 2011.
In 2013 Madelaine Drohan, author of the Canadian International Council report entitled The 9 Habits of Highly Effective Resource Economies: Lessons for Canada,and a Canadian correspondent for The Economist, echoed the IMF call for "stabilization funds" arguing that every province in Canada should consider establishing a sovereign wealth fund, as global peers have done, and treat non-renewable resource revenue as "capital to be saved and invested, rather than income to be spent." She added that in provinces like Alberta where the Fund already exists, it "should be implemented with a great deal more rigour." Drohan warned in 2013 against the "political temptation" to "raid" the Fund and offered the Canadian Pension Plan Investment Board, a Crown corporation, the largest pension fund in Canada, as a model. By March 2015 the CPPIB fund had grown to $219-billion and made a 16.5-per-cent rate-of-return in 2013.
In its annual report on the Canadian economy in February 2013, the Washington-based International Monetary Fund urged Canada, and resource-rich provinces like Alberta and Quebec to "better manage boom-and-bust commodities cycles by stashing away more tax revenue in good times". IMF mission chief for Canada, Roberto Cardarelli, suggested that Norway, with the largest sovereign wealth fund, is an example Canada should follow. However, unlike Norway, resource royalties are collected at the provincial, not the federal level in Canada.
Max Fawcett, the editor of Alberta Oil magazine, warned that the "new" Alberta Future Fund, "which would receive $200 million a year" that would "support big-picture projects" and the two "new innovation endowments" announced by Finance Minister Doug Horner in the 2014 budget, would be funded by raiding the Alberta Heritage Savings Trust Fund. There were no new savings.
According to Fumbling the Alberta Advantage, a Fraser Institute report written in 2015, "Between 2005/06 and 2013/14, and adjusted for inflation, the province of Alberta garnered $101.3 billion in resource revenues."