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ECONOMY: Alberta’s 2007-08 surplus forecast at $4.2 billion, more than 100% above budget
        (AlbertIndex, February 20, Wednesday) --- Alberta’s forecast surplus for 2007-2008 has been raised by more than 100% to $4.2 billion, said the government in its third quarter fiscal update, as mandated by the Government Accountability Act. The revised forecast surplus is $146 million higher than the second quarter forecast, before taking into account increases in pension obligations.
        In January, an agreement with teachers resulted in the government assuming their $2.2 billion pre-1992 obligation for the Teachers’ Pension Plan. Including increases in pension obligations, the surplus is forecast at $1.8 billion. These pension obligations are not a cash requirement and do not affect the 2007-08 surplus allocations.

After cash adjustments, the government said $834 million is available in the third quarter to be allocated according to the in-year surplus policy. Two-thirds, or $556 million, is being allocated to the capital account and one-third, or $278 million, is being allocated to the Heritage Fund.

The government expects total savings to reach $1.9 billion in 2007-08, including:
    •    $1.6 billion saved in the Heritage Fund. This includes a total allocation of $1.1 billion under the in-year surplus policy and $451 million for inflation-proofing;
    •    $227 million deposited in the Heritage Scholarship Fund as announced in June 2007; and
    •    $150 million originally budgeted to be deposited in the Medical Research Endowment Fund.

Expense is forecast to be $33.8 billion, an increase of $701 million from budget and $289 million higher than forecast at second quarter. The increase from budget includes higher capital grants and increased disaster/emergency assistance for floods, forest fires and mountain pine beetle infestations.

Revenue is forecast to be $38 billion, a $2.7-billion increase from budget and a $435-million increase from the second quarter forecast. The increase is primarily due to higher income tax revenue, which is $2.1 billion higher than budget largely because of stronger growth in personal income and corporate taxable income.

Resource revenue is forecast at $11 billion, an increase of $704 million from budget, but an $88-million decline from second quarter. This reflects higher oil prices partly offset by lower-than-expected natural gas prices and the impact of a higher Canadian-U.S. dollar exchange rate.

The oil price forecast has been revised to US$79.82 per barrel for the fiscal year, up almost US$22 from budget, but essentially unchanged from second quarter. The average price-per-barrel from April 2007 to January 2008 was US $78.66 per barrel.

Natural gas prices are forecast to average C$.85 per gigajoule, 90 cents less than budgeted and 15 cents less than the second quarter forecast. The average price from April 2007 to January 2008 was C$5.71 per gigajoule.

The Canadian dollar is forecast to average 96.9 cents US for the entire fiscal year, up nearly 11 cents from budget.

The Heritage Fund is forecast to have realized net income in 2007-08 of $1.15 billion, a decrease of $69 million from budget, mainly due to lower equity market returns and the higher Canadian dollar relative to the U.S. dollar. At December 31, 2007, the Heritage Fund market value was $16.6 billion, an increase of $497 million from September 30, 2007.

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