Reforming Alberta's Heritage Fund: Lessons from Alaska and Norway

Abstract

The governments of Alberta, Alaska, and Norway have all created funds in which to deposit some of the revenues they receive from non-renewable natural resource activities. Despite Alberta’s rich natural resource endowments, its Alberta Heritage Savings Trust Fund is smaller than the others because of its relative underfunding and because of chronic withdrawals of most income from the fund. This paper explores the history and structure of the three funds, and offers recommendations for reform in Alberta, including a formal rule for the contribution percentage and institutional mechanisms to encourage proper fund management.

The paper finds that if the Alberta government had consistently deposited 25 percent of its non-renewable resource revenues from 1982-2011 — as the Alaskan constitution requires — total contributions would have been $42.4 billion, rather than the actual contributions of $9.1 billion during this period. And if the Alberta government had followed Norway’s example, and contributed 100 percent of its non-renewable resource revenues into its Heritage Fund, then from 1982-2011 total contributions would have been $169.5 billion, rather than $9.1 billion.

In order to fulfill its mission of preserving Alberta’s rich resource wealth for future generations, the government should seriously study the lessons from Alaska and Norway laid out in this study.

Keywords: government spending