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Alberta finances reel; fund value drops
The financial upheaval is coming at a high price for the Alberta government’s Heritage Savings Trust Fund, created in the 1970s to invest surplus oil and gas revenues for future generations.
Even before the real stock market bloodletting, the value of the fund dropped to C$15.2 billion from C$17 billion in the six months to Sept. 30.
With almost half the fund invested in equities, even grimmer results are expected when the government releases its fiscal update later in November.
A spokesman for the government said the fund has posted average annual real growth of 11 percent over the past five years, far exceeding the target of 4.5 percent a year. But those gains will be badly dented this year, as will all equity investments, he said.
Flow into treasury also down That downturn will also affect the flow of money from the fund into the provincial treasury in the current fiscal year after a contribution of C$827 million in 2007-08.
The government is also on the verge of disclosing the recommendations from a five-member panel on ways to better manage the fund along with other provincial savings and investments.
The Alberta fund has constantly faced criticism for lagging behind the performance of similar oil-based funds in Alaska and Norway.
Government revenues will also take a battering from the slide in commodity prices. It estimates each $1 per barrel drop in oil costs C$130 million over a full year, while a 10 cent drop in natural gas prices shrinks returns by C$114 million a year.
However, the government believes it remains on track for a 2008-09 budget surplus, given that it based its estimates on a conservative $78 per barrel for oil.
—Gary Park
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