Amid the red ink spilled by Alberta’s response to the COVID-19 pandemic and the energy sector’s struggles, the budget that Finance Minister Travis Toews tabled Thursday afternoon fills in more details on the province’s plans to grow its innovation economy.
The United Conservative Party (UCP) government projects an $18.2-billion deficit for the 2021–22 fiscal year, based on real GDP growth of 4.8 per cent this calendar year—slightly higher than big-bank economists’ consensus estimate—as Toews promised to spend on pressing needs like health care and infrastructure.
Leaders in the province’s tech sector have questioned the government’s commitment to diversifying Alberta’s economy beyond energy, particularly following the UCP’s cancellation of popular tax incentives, which The Logic reported were a factor in digital-media company Wattpad choosing Halifax over Calgary for a new office. The government has since promised new programs and supports to encourage innovative firms to launch in or move to Alberta. But Toews’s speech Thursday made clear that the longtime driver of the province’s economy is still priority number one. “Some suggest diversifying the economy requires a transition from our traditional sectors such as energy,” he said. “Let me be clear…. That is not this government’s position.”
Here’s what you need to know about the Alberta budget.
The innovation-economy blueprint: Alberta’s post-pandemic economic-recovery plan, announced in June 2020, promised strategies for industries that could diversify the provincial economy. It’ll fund them in part from $500 million that Thursday’s budget sets aside for new economic-recovery initiatives. The budget also sets major targets for the technology and innovation sector: 900 new companies, 20,000 new jobs and $5 billion in extra revenue by 2030. It cites increased operational funding to Alberta Innovates to expand its accelerator and scale-up programs, and the province’s forthcoming innovation employment grant, first announced in July 2020. The R&D tax incentive will replace five previous programs the UCP government cut in the 2019 budget, which prompted concern in the tech sector. Alberta will also get its own broadband strategy, and the province plans to digitize more operations and service delivery, a common priority across governments at all levels in Canada. The budget reflects “a greater understanding of what’s required to grow Alberta’s technology sector,” said Tamara Woolgar, executive director of the A100, which represents founders in the province. But she said more action is needed “in the areas of talent growth, retention, and leveling the playing field with other jurisdictions.”
The money industry: Finance and fintech is another sector getting a strategy. It includes “a new concierge office” to assist companies considering setting up in the province; it’ll work with regulators and the recently established Invest Alberta capital-attraction agency. The government is also working on a regulatory sandbox, which would exempt fintech startups from some rules while they test new products and services. A similar setup in the U.K. has helped the sector there grow. The federal government has similarly proposed a new agency to manage a group of regulatory sandboxes. Alberta will also back a three-year research project on the financial sector at the University of Calgary and other as-yet uncommitted institutions. In his speech, Toews cited the hiring spree of Calgary-based Symend, a debt-recovery platform that raised $73 million in May 2020. The city is also home to Solium Capital, a stock option-management platform for which Morgan Stanley paid $1.1 billion in February 2019.
Measuring success via VC: Thursday’s budget highlights the growth of investment in the province’s tech sector as a sign of attractive economic conditions. In his speech, Toews cited a Canadian Venture Capital & Private Equity Association figure showing companies in Alberta raised $304 million in venture capital in the first three quarters of 2020. And the province is setting its sights on attracting more such financing. The budget sets a target of $680 million in the 2021–22 fiscal year for investment in companies from funds and syndicates linked to its Alberta Enterprise Corporation (AEC) fund-of-funds. That’s up nearly 15 per cent from the $593-million goal in the last budget. The pandemic-recovery plan included $175 million in new money for the AEC.
A boost for Alberta Innovates: The Crown corporation, which provides research and company-growth funding, has faced successive funding cuts under both the UCP and its NDP predecessor. But Thursday’s budget reverses the trend, increasing Alberta Innovates’ spending target by just over $100 million over the next two fiscal years combined. It will spend $251 million this year, and $228 million in 2022–23, per the business plan laid out for the innovation ministry. The agency “has done an amazing job over the last long time actually developing technologies” in the environmental and pharmaceutical sectors,” Innovation Minister Doug Schweitzer told The Logic in August 2020, adding that the province must work to ensure “investors around the world know this is a tool that they can use to help develop their startup [and] technologies that are going to create the next unicorn for Alberta.”
Bringing in the big bucks: Invest Alberta will get nearly $75.8 million over the next three fiscal years. In his speech Thursday, Toews touted one of its first wins—earlier this month, Vancouver-based mCloud said it would move its headquarters to Calgary and hire there; Invest Alberta will help the cleantech firm with business development, though it won’t provide direct funding. The innovation ministry is also getting $166 million over three years to roll out the innovation employment grant. The Council of Canadian Innovators—a lobby group whose members include the CEOs of many of the country’s prominent high-growth tech firms—welcomed the new incentive and Alberta Innovates funding. “We applaud this government’s new strategy focused on increasing Alberta’s innovation and commercialization outputs and driving economic renewal through homegrown ‘scale-up’ companies,” executive director Benjamin Bergen said in a statement. In its pre-budget submission, the CCI, called for the new grant to be extended to commercialization costs such as market research and intellectual property filings. Thursday’s document does not fulfill that wish. The group also called for the province to establish an IP strategy.
Curbing emissions: The budget highlights the need to develop and implement an environmental, social and governance (ESG) strategy to help with the oil-rich province’s economic recovery. The document doesn’t outline an actual strategy, however, and offers scant details about how the province will reduce emissions, despite its commitment to meeting targets set by the Paris Climate Agreement. The document cites a previously announced $750-million investment over three years to support projects that help the biggest energy emitters reduce their carbon outputs through the Technology Innovation and Emissions Reduction (TIER) program. The government is projecting it’ll spend $338 million through TIER in 2021–22, down from $488 million in 2019–20 and the estimated $810 million it’s forecasting it’ll spend for the current budget year. A substantial portion of the upcoming TIER budget ($120 million) will fund innovation and technologies, and projects in the carbon-capture and -storage space. Another $125 million is allocated for “deficit reduction and Canadian Energy Centre,” an Alberta-based agency set up by the government as a “war room” meant to promote Canada’s oil and gas sector; the centre, which the Alberta auditor general criticized for its use of single-source contracts, among other issues, received $30 million from the government last year.
Andrew Leach, an energy and environmental economist at the University of Alberta, said even though the budget doesn’t detail the ESG strategy, the intention to create one is notable. “For a premier who, two years ago, called climate risk-disclosure the flavour of the day, this is a pretty big swing,” said Leach. However, he has some reservations. “There’s sort of this move to use the words ‘ESG’ where we used to use ‘ethical oil.’ That’s probably where the government is headed,” he said. “They’ll actively talk about how Alberta is a leader on these sorts of measurements as opposed to what I think they could do, which is to be a leader in defining and enforcing disclosure rules and risk assessments in the resource sector.” Leach added that Alberta is in a strong position to create such a strategy, given that large firms in the oil and gas industry have already had to start addressing climate risk and emissions targets in response to shareholder pressure.
Setting outcomes for higher education: The budget again pledges to implement performance-based funding for universities and research institutions. Alberta first announced the plan in early 2020, but it was delayed due to COVID-19. The program will make a portion of the government’s grant funding for post-secondaries contingent on outcomes like graduates’ employment rate and median income, and institutions’ revenue from sponsored research. The government planned to initially base 15 per cent of its funding for an institution on such factors, increasing it to 40 per cent by 2022–23. The model is meant to limit post-secondaries’ reliance on government funding, which is disproportionately high on a per-student basis in Alberta compared to B.C. and Ontario. While the government tries to limit its spending for universities, it’s targeting higher revenues from sponsored research. “The ability of Alberta universities to attract research funding is an important measure of the capability and capacity for research and innovation in the province,” the budget documents read. The government is targeting $933 million in sponsored research revenues for universities in 2021–22, up from $922 million in 2019-20, with the aim to grow revenues to $969 million by 2023–24.
