Alberta finances take hit in latest fiscal update

The value of Alberta's Heritage Trust Fund has dropped $1.2 billion in the last six months, and this year's surplus is now expected to be $2 billion instead of $8.5 billion, according to the province's second quarter fiscal update, released Tuesday.

The update is the first since oil prices dropped from a high of $147 a barrel in July to just over $55 a barrel on Monday.

"While Alberta is not immune to the turmoil in world financial markets, we are extremely fortunate to be in the position we are today," Finance Minister Iris Evans said in a news release. "We are well placed to weather the global economic crisis, benefitting as we do from a low tax environment, no provincial debt, and an economy still predicted to grow next year.

"That being said, we recognize that we must continue to be prudent as we plan for next year's budget."

The Alberta Heritage Savings Fund now has a value of $15.8 billion. It was worth $17 billion at the end of the last fiscal year.

The $2 billion surplus is $435 million more than what was in the original budget.

Revenues for 2008-09 are now forecast at $39.9 billion, an increase of $1.3 billion from the budget.

But expenses are up as well. They are now forecasted at $37.9 billion, an increase of $905 million from the budget due to increases in disaster and emergency funding, as well as "priority program and capital spending," according to the news release.

The government will no longer spend previously earmarked amounts of $1 billion for capital expenses and $3 billion in savings.

However, it will still spend $2 billion for carbon capture and storage research and another $1.8 billion for green transit initiatives, although that figure is $224 million less than what was originally allocated.

Evans forecasted a $1.6-billion surplus for this fiscal year in her spring budget, partly based on oil averaging $78 a barrel.

That was bumped up to $8.5 billion in the summer when oil prices hit record levels.

Alberta wouldn't be in danger of not meeting its financial commitments until oil drops below $40 a barrel, Evans said on Monday.

She said she plans to talk to Albertans this week about what impact these changes could have on the province's spending plans.

With files from the Canadian Press