Alberta's first-quarter operating surplus criticized

Alberta's fiscal report for the first quarter showed higher revenue than expected with an operational surplus of $715 million, but some critics say it is not a true picture of the province's finances.

Minister says economy strong after first quarter, but critics say province not factoring in money borrowed for capital projects

Alberta Finance Minister Doug Horner delivers a fiscal update in Edmonton on Thursday. (Jason Franson/Canadian Press)

Alberta's fiscal report for the first quarter showed higher revenue than expected with an operational surplus of $715 million.

The surplus is largely due to current oil prices, said Finance Minister Doug Horner, who announced the figures during the province’s first-quarter budget update in Edmonton Thursday.

Horner cautioned against forecasting provincial spending based only on the fluctuating price of oil. He said the province should instead "hold the line" when it comes to spending.

The price of the benchmark West Texas Intermediate oil is hovering around $110 US a barrel, which is $7.50 a barrel higher than the provincial budget estimate.

Higher oil prices and investment income saw revenues in the first three months of the 2013-14 fiscal year hit $9.9 billion, about $211 million higher than expected.

Operational spending was $9.2 billion, about $113 million less than expected, due mainly to the timing of health grants.

Surplus questioned

The budget had predicted a $451-million deficit on day-to-day spending when released in March, but was criticized at the time for the new format which made it hard to compare prior budgets and find the actual deficit.

CBC News reported in March that the province was facing a $1.97-billion deficit and was borrowing $4.3 billion to pay for capital projects.

Wildrose MLA and finance critic Rob Anderson says the government's claim of a surplus doesn't take into account the money borrowed for capital projects and the use of reserve funds in its spending.

"Doug Horner is a budget contortionist and a Twister champion if he thinks that our budget is balanced in the province right now — and it's not balanced despite record revenues," said Anderson, adding he estimates the true consolidated deficit figure to be roughly $4 billion or $5 billion.

Anderson said the government will have to do more than hold the line on spending in order to achieve its goal of balancing the budget.

"If you can't balance the budget when oil is at $100 and $110 a barrel, as it is now, when are you going to do it?" he said.

Money allocated for flood recovery

Derek Fildebrandt of the Canadian Taxpayers Federation said given that 88 per cent of the capital budget is being paid for by borrowed money the deficit and flood-aid costs will leave the government $7.4 billion in the hole this year.

"It certainly is some sort of fantasyland when the minister claims that we are potentially on track to run a surplus this year," said Fildebrandt.

Horner said the province's contingency fund still has $3 billion in it after the first three months of the fiscal year.

The minister also says $148 million has been spent so far on flood relief and another $556 million has been allocated for the coming months.

Horner added that flood relief would continue to appear as a line item in the provincial budget for up to five years.

"The flooding disaster was unprecedented and unexpected — it's definitely thrown us a curveball — but we have the right game plan and we have the right resources," he said.

Flood cost estimated at $5B

Horner said the final bill facing insurers, the province and federal government is likely to be around $5 billion.

About $1.7 billion of the $5-billion cost is expected to be covered by insurance companies, he said. The rest will be up to governments, but it hasn't been determined who will cover what.

Raging waters after a torrential downpour June 20 swamped downtown Calgary and its low-lying neighbourhoods and inundated many surrounding communities. The Town of High River was devastated.

The provincial government immediately promised $1 billion in relief.

Horner said Alberta's GDP has ironically gone up slightly as a result of increased business to repair damaged homes, businesses and roads.

"That doesn't mean the flood was good for our economy," said Horner, who noted that reconstruction is likely to strain a tight labour pool and push up the cost for building materials.

A failure to plan for disasters, says opposition

Liberal Leader Raj Sherman said Horner's update was the first true account of what the government's failure to prepare for a flood has cost.

He noted that the province didn't follow through on recommendations following flooding in 2005 and didn't apply for money from the federal government for flood mitigation in 2012.

"(As a result) we are heading into possibly another $5 billion in (flood) costs, not to mention the negative effects on the economy and the disruption of the lives of Albertans," said Sherman.

NDP Leader Brian Mason said he wants to see rigorous scrutiny in the months to come of who gets flood aid and who doesn't.

He suggested the rules need to be clear for those living in riverside luxury homes, for example, versus those living in condos outside flood-prone zones.

"There's potential for an awful lot of money to go out the door to people who do not need it," said Mason. "When the premier promised at the outset to pay every dime of every cost for everybody in the province, I thought it was pretty thoughtless of her."

With files from The Canadian Press