Revenue roller-coaster costs Alberta

Province committed to flood aid as financial picture weakens

edmontonjournal. com To see an interactive graphic illustrating the difference in Alberta’s projected versus actual revenue from nonrenewable resources, go to this story on our website. Alberta brought in only twothirds of the $11.2 billion in non-renewable resource revenue it originally counted on in 2012-13 after a grim fiscal year that started out full of pre-election optimism.

The Redford government had banked on bitumen, crude oil and natural gas royalties, along with the sale of Crown land leases, to account for more than a quarter of the province’s revenue between April 1, 2012, and March 31, 2013. But it revised those projections — and signalled the need for austerity — as world oil prices, combined with the price that Alberta gets for its oil compared to the North American benchmark, fluctuated throughout the winter.

In the end, Alberta collected $7.6 billion in non-renewable resource revenue, taking a $2-billion hit from bitumen, $219 million less from crude oil and $268 million less in natural gas royalties than budgeted. Income from land leases also came in at just $1 .1 billion, about half of what was expected.

Alberta Finance released the tally of the province’s revenue and spending as of March 31, 2013, at an informal news conference Thursday outside Calgary Police Headquarters.

The still-unfolding flood disaster, as well as Fort McMurray flooding earlier this month, meant that most questions around the province’s financial health focused on how much remains in its rainy-day fund after the $2.8-billion deficit in 2012-13.

That’s $2 billion higher than originally budgeted, but still better than expected in February, when Finance Minister Doug Horner warned Albertans to brace for a deficit as high as $4 billion.

A deficit of that size would have reduced the contingency account, previously known as the Sustainability Fund, to about $2.5 billion.

The fund sat at $17 billion in 2008, but has been used ever since to cover annual deficits.

On Thursday, the government reported the contingency fund was at $3.3 billion at the end of 2012-13.

Premier Alison Redford has promised to pay the complete tab for the recovery, in conjunction with whatever federal emergency aid eventually flows to the province.

Horner said he believes the province is in a financial position to deal with both the multibillion-dollar flooding tab and the projects it outlined in the 2013-14 budget. That spending blueprint includes a plan to borrow $17 billion over the next three years to build infrastructure, including critical road and school projects.

“We believe we can do both. We believe we can rebuild and build,” Horner said.

Opposition parties agreed Thursday that the province must back flood recovery efforts. But they argued the Redford government must make changes to protect the rainyday fund and avoid borrowing too much.

Wildrose MLA Shayne Saskiw said the 2012-13 results prove Alberta is spending too much since it repeatedly has clawed into its rainy-day fund to cover deficits.

“When you look at these numbers, this is the second highest revenue numbers we’ve had in Alberta history,” Saskiw said, referring to 2012-13’s $38.6 billion in total revenue.

He said the government needs to re-evaluate its spending for 2013-14.

Liberal MLA Kent Hehr, his party’s finance critic, said the year-end financial portrait shows that the pre-election budget, with overly rosy resource royalty projections, was a sham.

But Hehr, whose CalgaryBuffalo constituency is at the heart of the city’s flooding disaster, said the year-end results and the cost of flooding relief show the province needs to ask more Albertans to pay their fair share of taxes.

“There has to be a recognition that this all can’t come on the backs of spending all the non-renewable resource revenue,” Hehr said.

NDP Leader Brian Mason said the fact Alberta has to worry about the health of its contingency fund may indicate a need to rethink Alberta’s tax structure.

“Because of the structural deficit they’ve created, they’ve had to draw down the rainyday fund to pay for the lack of corporate and personal income tax revenue. It’s not available for natural disasters like this one,” Mason said.

Horner said it was irresponsible for people to suggest Alberta doesn’t have the financial strength to deal with the crisis. In addition to the contingency fund, the Heritage Savings Trust Fund also holds $16.8 billion.

He also said there were some bright spots in the 2012-13 results, including higher revenue from income tax, investments and gaming than expected. The government also saved $800 million in 2012-13 through belttightening.