The Alberta government is spending a record $33 billion this year — pumping billions into schools, roads and health care — and still expecting a $2 billion surplus.

Alberta budget 2007 highlights
$33 billion in spending and $35 billion in revenue will leave an estimated surplus of $2 billion.
A 16 per cent increase in tobacco taxes starting at midnight Thursday adds $5 to a carton of cigarettes.
$447 million for affordable housing over the next three years.
$18 billion for building projects over three years, including roads, schools and hospitals.
A 17 per cent increase in total spending, with program spending up 10 per cent over last year's budget.
A new formula will divert one-third of unbudgeted surplus cash into savings, two-thirds into projects.
$400 million in new municipal funding, which will reach $1.4 billion annually after four years.
A 26 per cent hike in the education tax credit for post-secondary students and their parents.

In announcing the 2007-2008 budget on Thursday, Finance Minister Lyle Oberg said Alberta has to catch up to the rapid pace of the province's economic growth.

"It is record spending. That's because our province is at record levels of population. It's at record levels of economic growth. It's at record low levels of unemployment."

Critics dismissed the budget.

"This is not the price of prosperity," said Opposition Liberal Leader Kevin Taft in his pre-budget news conference.

"This is the price of a government that stuck its head in the sand while oilsands project after oilsands project was announced and implemented.

"This is the price of bad management."

Scott Hennig, Alberta director of the Canadian Taxpayers Federation, called the spending "irresponsible."

"I hope somewhere in that $33 billion they are hiring some clergy to pray for high oil and gas prices, because that's what they're going to need to maintain this budget," he said.

$18 billion for schools, roads, hospitals

This is Premier Ed Stelmach's first budget and the spending increases focus on catching up to the infrastructure backlog that built up under Premier Ralph Klein, who channelled previous multibillion-dollar surpluses into paying off the province's debt.

Over the next three years, $18 billion will be spent on building projects such as schools, roads and health facilities — many of them previously announced ventures that have been made more expensive by Alberta's soaring construction costs.

"What has occurred is there's been a lot of delays," Oberg said. "If we have a project come in on time, we're pretty fortunate."

Among the capital investments:

• Municipalities will receive $4.3 billion over three years to fix roads and bridges, build affordable housing and upgrade public transportation.
• School building projects will get $1.3 billion.
• Health facilities, including a new hospital in Grande Prairie, are allotted $3 billion.
• Post-secondary students will benefit from $22 million to limit tuition increases to the cost of inflation and from the post-secondary tax credit increase to $600 from $475.

NDP Leader Brian Mason said the spending amounts to the Conservatives admitting they should have been making this kind of investment years ago.

"They're also going to create quite a bit of inflation and it's going to mean that middle-class families — working families that are struggling to make ends meet — are going to have a real hard time paying rent, paying property taxes, paying for the utilities."

Wayne Stewart, head of the Calgary Homeless Foundation, said the $447 million set aside for affordable housing in Alberta over three years isn't nearly enough to build the more than 2,000 new units Calgary needs, but he called it a good first step.

"I am positive for a number of reasons," he said. "One of them is the very fact that they are mentioning affordable housing."

One-third of unexpected surplus to be saved

Oberg has also laid out a plan for any extra money that comes in this year.

In the past, decisions on how to spend unexpected surpluses from oil and gas royalties have been made as the money rolled in. In this budget, Oberg has promised to place one-third into savings and two-thirds into even more capital expenditures.

"Our position on government is that we have to deal with what is happening in Alberta today, but if we get a bonus, let's save it," he said.

The budget is based on oil prices at $58 US per barrel and gas at $6.75 Cdn per gigajoule.

Smokers will pay more

The charitable donations tax credit will almost double to 21 per cent.

But tobacco taxes will increase by 16 per cent starting at midnight Thursday, adding $5 to a carton of cigarettes, and giving Alberta the highest tobacco taxes in the country.

Oberg said the tax increase will reduce smoking and promote a healthier lifestyle. But smoker Sarah Cherewho called the higher tax a cash grab.

"It would get more of us to quit, which is better for the environment in the long run. It lowers our death rates of cancer and all this. I am sure there is a lot of positives, but really, they're just taking money from us," she said.

Money comes with strings: Calgary mayor

Municipalities, the environment, and the disabled were among the losers in this year's budget, critics said. 

Calgary Mayor Dave Bronconnier said the Stelmach government didn't deliver on its promise to unconditionally give municipalities $1.4-billion a year.

"We don't have new, unconditional money. What we have are strings attached to a series of projects, some internal to this municipality, some external."

Municipalities will only get an extra $400 million this year, an amount that won't grow to the $1.4 billion a year until 2011. Bronconnier said the money is insufficient for priority projects such as building the west leg of the C-Train.

Amy Taylor, an economist with the environmental group the Pembina Institute, said the government should have earmarked dollars to deal with the environment, especially since Canadians have called it their highest priority.

"This budget is a failure to Albertans from an environmental perspective. There was an obvious gap in the budget today, without a mention of the environment whatsoever."

Taft said he is also disappointed that health-care premiums were not eliminated, while Mason said a $50 a month increase in payments to the severely disabled in the budget is not enough to keep up with inflation.

With files from the Canadian Press