Alberta the nation's No. 1 overspender: Province also worst at
revenue forecasts: study
The Calgary Herald

Tue 27 Feb 2007
Page: A1 / Front
Section: News
Byline: Jason
Fekete
Source: Calgary Herald

The same day the Stelmach government pegged this year's
surplus at $7 billion, a new report reveals Alberta is the worst province in
Canada for overspending its budget and is jeopardizing its long-term fiscal
stability.

Alberta also fared worst in the country at predicting revenues, lowballing
them by $33 billion between the 1997 and 2006 fiscal years, according to the
study released Monday by the C.D. Howe Institute, a Canadian think-tank.

The report found Alberta has spent nearly $14 billion beyond its annual
fiscal blueprint over the past decade, with an average overrun of seven per cent
each year -- worst among the provinces.

"It's a huge number," C.D. Howe president
Bill Robson said
of Alberta's out-of-budget spending. "The real issue is when there is a surprise
on the revenue side, do they spend it? And, certainly in Alberta's case, there's
evidence that is so."

Robson, who co-authored the study, argued Alberta's financial planning is
making its annual budget "a bit of a sideshow." And he warned spending resource
windfalls -- rather than saving them -- is eroding Alberta's financial base for
future years, when oil and gas revenues could fall, and program budgets are
expected to soar.

Robson also cautioned that taxpayers should be concerned because spending
ultimately drives up the level of taxation, even in conservative Alberta.

"It's like an unbudgeted tax hike," he said.

The report was released the same day Alberta's third-quarter fiscal update
identified a projected surplus of $7 billion this fiscal year -- about $2.9
billion higher than what was budgeted.

The expected windfall would be the second-largest in the province's history
-- next only to the $10-billion surplus last fiscal year (including the $1.3
billion allocated to resource rebate cheques).

Total revenue is pegged at $36.6 billion, about $4.2 billion above budget.
Non-renewable resource cash accounts for $11.7 billion of total revenue, nearly
$400 million more than the spring blueprint.

But the government's largest gains since last spring came from an additional
$3.7 billion in personal and corporate income tax, and investment income.

The additional $1.5 billion in government revenues between the second and
third quarters will be allocated to the Sustainability Fund (used to cushion
unforeseen drops in revenues), bringing it to nearly $7.2 billion.

About $2.4 billion of the surplus was directed to the Heritage Fund,
endowments and other funds, while $1.8 billion was allocated to the Capital
Account.

The market value of the Heritage Fund is pegged to be $16.6 billion by the
end of the year, after factoring in deposits and inflation-proofing.

Finance Minister Lyle Oberg told reporters in Edmonton the government will
likely introduce a surplus allocation formula with its April budget that would
prevent or limit out-of-budget spending for that year.

It could mandate the government to direct a certain percentage of resource
revenues during that year -- for example, to savings, capital investment and
possibly some top-up spending.

"It will be associated with the budget so that each and every year that can
be debated, because obviously it needs change," Oberg said.

Liberal finance critic Rick Miller said Oberg's surplus plans for individual
years don't go far enough to securing the province's future. Rather, he called
for a visionary blueprint for the province's oil and gas cash.

"It doesn't do anything to ensure long-term sustainability, and that's the
real issue," Miller said.

As part of a long-term plan, the Liberals would boost the value of the
Heritage Fund to $120 billion by 2021, he said, and would see 30 per cent of
annual non-renewable resource dollars invested into endowment funds and erasing
Alberta's infrastructure debt.

Scott Hennig, the Alberta director of the Canadian Taxpayers Federation, said
Oberg's surplus allocation formula is a good first step, but needs to be
enshrined in legislation to lock future governments into saving down the road.

[email-masked]

Illustration:
• Colour Photo: Lyle Oberg.
•
Graphic: C.D.
Howe Institute /
(See hard copy for graphic).
• Photo: ***** New Photo *****

Edition: Final
Story Type: Business
Length:
636 words