Alberta's finances took a rosy turn in the first three months of the 2011-2012 fiscal year, as $2.1 billion was shaved from the deficit over the first quarter.
The government is still poised to end the fiscal year with a $1.3-billion shortfall that will be covered by the provincial sustainability fund, but higher-than-expected land sales and royalties helped stem the tide of red ink.
The province projected a $3.4-billion deficit when it first introduced the budget back in March.
Finance minister and Treasury Board president Lloyd Snelgrove called the results good news, but stressed that, to stay on this course, the government is going to have to be balanced and reasonable.
"The government's task is clear: manage the province's fiscal affairs prudently and avoid making any rash moves that could undermine confidence and put our economy, our fiscal health at risk."
Despite his emphasis on prudence, Snelgrove predicted the government's books would be in even better shape by year's end.
"I think there is a very real chance that, at the end of this year, we will be back in the black."
Revenue up
Much of the province's extra cash came from higher prices for land sales, which were a full $1.3 billion higher than expected. That tally included a record-setting sale in June when the government pulled in $842 million with the sale of lease rights to 270,000 hectares.
Oilsands bitumen generated $773 million more in royalties than anticipated. The government estimated bitumen would bring a price of C$72.02 per barrel, but has now revised that to C$76.34. Over the first three months of the government's fiscal year, it has actually averaged higher at C$82.77.
Conventional oil royalties brought a windfall of $231 million, as higher crude oil prices combined with increased production. In the March budget, the government pegged crude prices at US$89.40 per barrel, and has now increased that figure to US$97.85, while in the first three months of the year prices have averaged US$102.56, according to government figures.
The increased revenue came in handy as the government also saw an increase in expenses, mostly in disaster recovery, including enormous costs from the Slave Lake wildfire in May.
In total, the fire has cost the province $159 million, which does not include additional money the government has pledged to help the town rebuild in future years. The government also forked out funds for agricultural recovery, southern Alberta floods and other forest fires, adding up to $456 million overall.
Snelgrove argued the fiscal update was proof Premier Ed Stelmach had found the right balance in this year's budget.
"It seems that most of the media and most of the people vying for some kind of position in Alberta want to blame him for everything that went wrong, so I think in all fairness, it wouldn't hurt to give him credit for something that went right," he said.
Rose-coloured coffers?
Opposition critics say the government's oil projections are part of the reason this fiscal update is misleading. Oil was trading in the low US$80 range last week, well below the government's target.
"I think it is Snelgrove in Wonderland. It is not a valid projection. They are really spinning this in a way to try and make Albertans think everything is OK," said NDP leader Brian Mason.
Wildrose Alliance finance critic Rob Anderson said the numbers are essentially spin.
"They are doing that in order to come out with the happy news that they have shrunk the deficit," Anderson said.
The update covers the first three months of the fiscal year, ending in June, and department officials made it clear their assumption don't factor in recent economic turmoil that has driven down the price of oil and other commodities.
Snelgrove said the numbers represent only the financial situation at the end of June.
"It is much like a report card; the first report card is what your child did until then. It is the final report card that is the big one."
Liberal finance critic Hugh MacDonald said the government should be cautious, but renewed calls for more funding in education.
School boards across the province have argued their budgets are cumulatively $100 million short and they will have to lay off teachers, leading to large class sizes.
MacDonald said that is avoidable.
"I want $100 million of that used to support public schools and public school students," he said. "If they do this immediately, school boards will have the opportunity to plan, get on the phone and hire teachers."
MacDonald said what he didn't want to see was the windfall being used to buy votes in the next election.
"I don't want this government to be using tax money as we get closer to the election for the grip-and-grin cheque ceremonies."
Spending problem
Anderson said even if the numbers are accurate, they are worrying because the government is still in a deficit.
"It is just incredible that we can't balance the budget at $100 a barrel. I mean, if you can't do it then, when are you going to be able to do it?"
Scott Hennig, Alberta director of the Canadian Taxpayers' Federation, said it is clear the next PC leader is going to have to cut spending to get the finances in order.
"The next premier has a big steaming mess to clean up and they are going to have to get to work," said Hennig.
Anderson said it is a clear sign the government has no plan for returning to the black.
"The PC balanced budget strategy is cross your fingers and hope the price of oil goes to $120 per barrel, and that is not responsible."
