The Alberta government ended the year on a financial high note, with a larger sustainability fund and a lower deficit than first budgeted.
The 2010-2011 financial results were released Wednesday morning and showed the government ran into the red to the tune of $3.4 billion last year, a number $1.3 billion lower than was first anticipated in the budget.
These better numbers, combined with better numbers from 2009-2010, allowed the province to draw less on the sustainability fund. The fund finished the year with $11.2 billion, $3 billion better than budgeted.
The Alberta Heritage Savings Trust Fund also outperformed expectations, with $104 million more in investment income than anticipated, bringing the total value of the province's savings account to $15.2 billion.
In total, the trust fund earned $1.08 billion last year, equalling a 10.4 per cent rate of return. The fund transferred $720 million from the earnings to the province's general revenues and kept $360 million to protect the fund from inflation.
Minister of Finance and Treasury Board president Lloyd Snelgrove said the positive financial results were a clear sign the government's approach to dealing with the recession was the right one.
"We resisted calls to increase spending or to make drastic cuts and it is clear now that our plan is working," he said. "We have a plan, we stuck to it and it has worked."
The reduced deficit is a result of a number of factors, but primarily comes from much higher Crown land sales than the government budgeted for. The government took in a record $2.6 billion from Crown leases, which was $2 billion higher than the budget predicted.
Oil royalties were bigger than expected because prices were higher than the government forecasted, bringing in $573 million more than was budgeted. That increase would have been even higher, but the high Canadian dollar and disruptions in pipeline networks prevented that.
Snelgrove argued this furthered the case for a pipeline to the West Coast.
"A pipeline to the Pacific Ocean is critically important to Alberta," he said.
The government saw $445 million less in revenues than expected from natural gas as its price failed to meet government expectations.
Snelgrove said that, with more of the government's royalties coming from the oilsands, there should be more stability in those numbers in the future.
"When you see the huge investment into the Wood Buffalo-Lac la Biche-Cold Lake area, it is going to be very difficult for them to get in and out of that business. They normally make multi-year commitments."
The government books were also thrown off by the cost of several disasters last year, adding an unbudgeted $438 million to the books. The government doesn't specifically budget for disasters and draws on the sustainability fund to pay for the costs.
Snelgrove said the costs of this year's disasters, including extensive flooding in southern Alberta and the Slave Lake wildfire, would likely be higher.
He said the government might look at budgeting for more disaster prevention measures, but it is hard to budget for the disasters themselves.
"As a government I think you are going to have to anticipate there are going to be some disasters."
Opposition unimpressed
The better news is not good enough for provincial opposition leaders, who said the government is doing a poor job of managing the province's books.
NDP leader Brian Mason argued the government shouldn't claim credit for forces it doesn't control.
"I would like to begin by congratulating the government on the rise of international oil prices. It has clearly released a lot of pressure on the province's balance sheet," he said sarcastically.
Liberal finance critic Hugh MacDonald said only the sustainability fund saved the government from a financial mess.
"I am relieved that we have a sustainability fund," he said. "It was a Liberal idea from many years ago, an Alberta Liberal idea, and I am glad the government adopted it."
The government gave an additional $1.5 billion to health care last year and Mason argued that was symptomatic of a government that fails to think long-term.
"That kind of fire brigade budgeting is bad management, it is bad budgeting and it really reflects a government that is governing without careful planning and public priorities in mind."
Scott Hennig, Alberta director of the Canadian Taxpayers Federation, said the government needs to reduce spending to bring the budget in balance and the lower deficit is more about luck than anything else.
"This government is patting itself on the back because it had a windfall in land sales due to high oil prices," Hennig said. "That is not a plan. Hoping for higher revenues is not a plan."
