We got lucky

Province’s unexpected good fortune from last year isn’t today’s reality

We hate to rain on your long weekend, but the government’s rosy fiscal update on Thursday has to be taken for what it really is — a stroke of good luck that occurred last year. It has nothing to do with the reality of $80 oil today and the prospect that we could be swimming in an ocean of red ink if it stays at current levels.

“Nobody should be jumping out of windows today over $80 oil, because three months from now, it could be back to $105,” Finance Minister Doug Horner said.

It is the typical cross-your-fingers comment that we have come to expect from the freespending Redford government, which based its 2012-2013 budget on a West Texas Intermediate price of $99.25 a barrel, leading to an expected $886 million deficit.

Horner can hope for $105 oil all he wants, but projections from credible sources peg it $10 lower or more. Moody’s recently lowered its crude price assumptions to $90 for West Texas Intermediate in 2012, with an additional expected decline in 2013 to $85. Scott Hennig of the Canadian Taxpayers Federation notes that $97 oil will be needed to balance the budget.

Last year, the government got lucky. Its prediction of $80 oil turned out to be too modest — which along with investment revenue and the sale of land leases — resulted in just a $23 million deficit, compared to the $3.4 billion shortfall predicted. It was a record revenue year.

Alberta budgets, of course, are full of rabbit holes and trap doors. Out of one last year came a $3 billion withdrawal from the province’s rainy-day Sustainability Fund, as well as $344 million paid into general revenues from the Heritage Fund.

This year, the government might not get so lucky. Rob Anderson, the Wildrose finance critic, naturally had a field day at Horner’s expense.

“The PCs just can’t help themselves from squandering Alberta’s wealth,” he said. “We’re coming off a year of nearrecord oil prices and land sales and they haven’t eliminated the deficit, saved a single penny for the future and they are still raiding our savings to pay for their overspending. It’s absolutely shameful that we continue to have nothing to show for the staggering amount of money we are taking in.”

The good news is that the Sustainability Fund is now up to $7.5 billion, $2.2 billion more than anticipated. Horner promises the government will make adjustments to its spending as necessary.

Let’s hope so. A reliance on volatile energy prices is a roller-coaster ride that most Albertans want to end. The province won an unexpected lottery last year. One day, Lady Luck may not be at Horner’s side.

A reliance on volatile energy prices is a rollercoaster ride that most Albertans want to end.