Alberta's Progressive Conservative government is projecting a $3.4 billion deficit for the 2011-12 fiscal year, while relying heavily on the savings account known as the Sustainability Fund for billions of dollars of spending on infrastructure and health.

The fund, now forecast at $11.2 billion, is projected to end the fiscal year at $5.3 billion, but Finance Minister Lloyd Snelgrove defended his government's use of the money.

"I don't think Albertans would want us to leave the rainy day savings account that we assembled strictly for use, when we needed it, in the bank," Snelgrove told reporters at a news conference before his budget speech.

"And to cut three or four billion dollars out of the operational budget and capital budget of the province would have had long-term negative effects on health care, on education."

The government is projecting a return to surplus in 2013/14, a year later than was earlier expected.

Expenditures are forecasted to be $39 billion, with revenues estimated to be $35.6 billion.

The province will spend $6.6 billion on schools, highways, health facilities and municipal infrastructure in 2011.

Projects earmarked for funding include the Grande Prairie Regional Hospital, the police college in Fort McLeod, the first phase of the cancer infrastructure plan for Calgary and Edmonton and the renewal of up to 8,100 social housing units.

The province will complete the construction of 17 schools, as well as finish expansion and upgrading of 14 more. There were no new projects announced in the budget.

Snelgrove said the government wants to keep spending on services and infrastructure at a consistent level.

"We don't want to go back into the pendulum days of government where you've gone from overspend to an overcut," he said.

Service Alberta hikes fees

Provincial health board Alberta Health Services will get a funding increase of $545 million or 6 per cent — money that was first promised last year as part of a five-year funding plan.

Overall, operating expenses for Alberta Health and Wellness are estimated to be $14.8 billion, a 0.8 per cent increase over the previous year.

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Wildrose Alliance Leader Danielle Smith says the Tories are spending too much. ((CBC))

Education is also getting a funding increase — $251 million or 4.5 per cent. Part of the increase is to cover the 4.4 per cent increase to teachers' salaries on Sept. 1.

The province is also hiking some fees paid by Albertans.

Service Alberta will increase motor vehicle, land title and corporate registry fees for the first time since 2002, increasing government revenues by $83 million. Campsite reservation fees are also rising to offset higher costs.

Aboriginal Relations, Employment and Immigration, Tourism, Parks and Recreation, Housing and Urban Affairs and Environment are set to have their budgets cut.

The Access to the Future Fund, which provides funds for universities to match grants made by donors, will be suspended for two years.

The University of Calgary and University of Alberta will each be affected by $5 million a year; the Mount Royal and Grant MacEwan Universities by $3 million each year.

The budget forecasts Alberta's economic growth rate will be 3.3 per cent for 2011-12.

Revenues are benefiting from strong oil prices and land sales.

Tories spending too much: opposition

Wildrose Alliance leader Danielle Smith called the budget irresponsible. She said the Stelmach government spends too much money and will use up the Sustainability Fund.

The $17 billion the government is spending on infrastructure over three years should be spread out over five years, she said.

"Last year we had $15 billion in savings," she said. "By the end of next year, we're going to have only $5 billion. They're practically vaporizing our savings accounts and that's the reason why we're seeing that they haven't solved the problem of their overspending."

NDP leader Brian Mason warned massive cuts are looming in next year's budget since revenues can't keep up with this level of spending.

"We will be faced with massive cuts to health care and to education, because this government has backed down in the face of pressure from the oil industry and from the Wildrose Alliance, and cut royalties and so we have the lowest royalties in the world," he said.

Liberal leader David Swann says he believes there are a number of ways to cut $1.5 billion out of the budget. The Tories have mismanaged the province's finances, he said.   

This Conservative government continues to act as if it's playing with an endless supply of Monopoly money," Swann said.

Education programs cut

While the education budget is getting more money, schools will see cuts to a number of programs, including the Alberta Initiative for School Improvement or AISI, which will have its funding cut in half.

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The president of the Alberta School Boards Association, Jacquie Hansen, said there isn't much money left after the teachers' salary increase is covered. ((CBC))

The program allows schools to share research, best practices and innovative educational leadership.

"We spent a lot of our AISI money supporting literacy, so it's going to mean that there is less opportunities for staff to further their knowledge and experience in offering those services," said Sarah Hoffman, vice-chair of the Edmonton public school board.

The province is also cutting 600 spaces for programs that teach students English as an alternative language.

School boards are also disappointed to learn there will be no money to build new schools over the next three years.

"We've got tons of projects backlogged, and we've kids in areas going to school in church basements,"said Jacquie Hansen, president of the Alberta School Boards Association.

But Education Minister Dave Hancock said there may be a way to build new schools by using private money.

"That's one way to do it," he said. "It's not the only way."