Alberta government creates fund to ease revenue swings

Gary Park

PNA Canadian Correspondent

The Alberta government has moved to get a handle on its roller-coaster revenues by establishing a sustainability fund to pay for critical infrastructure.

Finance Minister Patricia Nelson introduced legislation Feb. 24 to create a capital account fund to protect Albertans from volatile energy prices.

The fund will be launched with about C$450 million from an anticipated surplus of C$1.8 billion for fiscal 2002-03, with about C$910 million of that surplus directed to capital projects.

The government is now forecasting resource revenue of C$6.4 billion for the year, which ends March 31, far ahead of its original estimate of C$3.7 billion.

Premier Ralph Klein said the province has made great strides over the last decade, lowering its debt to C$5 billion from C$22 billion.

He said the sustainability fund will “establish a fiscal framework for the 21st Century” by bringing a new level of stability to government spending, without wavering from the commitment to balanced budgets.

Resource revenues over C$3.5 billion will be transferred to the fund, which will be used to avoid program cuts when the revenues fail to meet that threshold. The fund will also be available to pay for emergencies such as drought relief or fighting forest fires.

“It means we won’t ramp up spending when energy prices are high, but we will avoid spending cuts when prices drop below budget predictions,” said Nelson.

If the fund grows above C$2.5 billion, excess money can be used for debt repayment and capital projects, but not for program spending.

Nelson said Alberta’s strong economy is attracting more people to the province. As a result, “an aggressive capital plan is needed to respond to infrastructure.”

The new fund effectively moves beyond the Heritage Savings Trust Fund — Alberta's version of the Alaska Permanent Fund — which was established in 1976 to invest surplus oil and gas revenues and be drawn down only it times of great need.

The C$12.4 billion fund has been largely dormant since 1987, and lost about C$1.3 billion last year after getting mauled by the bear markets.