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Minister says Albertans will get a 'sobering' update on the province's finances

Article online since November 17th 2008, 0:00
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EDMONTON - Finance Minister Iris Evans says Albertans will get some "extremely sobering" news when she releases the province's second-quarter fiscal update on Tuesday.

This will be the first glimpse of how big a bite falling oil prices and collapsing markets have taken out of Alberta's energy revenues as well as various savings accounts and pension plans.

Evans rubbed her head as she told reporters that plunging oil prices and cancelled energy projects are taking a heavy toll on what appeared just three months ago to be a near-record surplus.

"Over the last few months we have seen things that nobody really anticipated, so there's some very sobering things to consider," Evans said Monday.

A government source told The Canadian Press the projected surplus is still larger than the $1.6 billion that was forecast in March when the budget was first released.

But the source says the surplus is now obviously far less than the near-record of $8.5 billion that was estimated after oil prices reached their peak of US$147 in the summer.

Evans says she plans to start a "conversation" with Albertans this week about the impact these lower revenues will have on government spending plans.

"People have seen markets decline. We had US$147 oil in July and now it's gone the other way," said the minister. "There's been delays in (energy) projects.

"I think for everybody you wonder how sustainable are the plans you've made for your future."

Evans said earlier this fall that the government could be forced to make some hard choices if revenues continued to fall.

"In a worst-case scenario, then you do look at your savings and say 'all right, what is an essential service to provide? Should we use those savings for this service?"' the minister said at the time.

"Things like health care and education, those things would have to be maintained."

Liberal Opposition Leader Kevin Taft said Monday he expects to see significant declines in government revenues as well as pension funds and the Heritage Savings Trust Fund.

"It's not going to be a pretty picture," Taft said in an interview. "And we're going to see a government completely unprepared for this."

The government already estimated last month that the heritage fund had lost more than $1 billion or six per cent of its value as a result of falling stock prices, leaving about $16 billion in the rainy day account.

An update on the heritage fund's value will also be released Tuesday.

But the Liberals have been pushing for years to have the government save a much larger share of the booming energy revenues that have created multibillion-dollar surpluses for the last 15 years.

However, Taft suggests it may be too late to boost savings at a time when the surplus is shrinking because of plunging energy revenues and losses in the markets.

"If this happens to be a long recession, we'll have nothing to show for the boom that we've just gone through in the last 10 years, he said. "And that will be tragic."

Evans also confirmed that later this week she will release the long-awaited government report on how the province should be handling its various savings accounts, which total roughly $40 billion.

The review was completed in January by a panel led by Jack Mintz, who is also head of the new policy studies school at the University of Calgary.

But the government decided not to release the report until it had decided how to respond to the key recommendations, including a call to save a larger share of energy revenues for the future.

Evans says she expects the Mintz report to generate a lot of comments from Albertans once it's released.

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