Edmonton... A vibrant, growing economy is strengthening Alberta's 2006-07 financial outlook as reported in the Government of Alberta's Second Quarter Fiscal Update. Revenue is now forecast to be $2.7 billion higher than budget, with tax revenue increasing nearly $2 billion due to personal income growth and stronger corporate profits.

Total revenue is forecast to be $35.1 billion, a $2.7-billion increase from budget and a $1.2-billion increase from first quarter. Most of the increase is due to higher income tax revenue. Personal income growth and updated assessment data for the 2005 tax year have combined to increase the personal income tax revenue forecast by an additional $1.4 billion. A stronger outlook for corporate profits has increased the corporate income tax forecast by $573 million.

"Tax revenue is increasing as the economy grows," said Finance Minister Shirley McClellan. "At the same time it's important to note that resource revenue is almost unchanged from the budget, and down $2.8 billion from last year, underscoring the importance of sustainable budgeting."

While oil prices have remained strong, natural gas prices have softened. Resource revenue is now forecast to be only $197 million higher than budget and $334 million lower than forecast in the first quarter.

Higher income tax revenue has increased the provincial surplus. The surplus is forecast at $5.4 billion, an increase of $1.3 billion from budget and $1.2 billion higher than the first quarter forecast.

The stronger fiscal position of the province has allowed the government to invest in additional capital.
A further $930-million increase in capital allocations has been announced in the Second Quarter Fiscal Update, in addition to the $1.76-billion increase announced in the First Quarter Fiscal Update. In total, capital funding has increased by $2.7 billion, including $895 million for 2006-07 projects and $1.8 billion for future years.

"We are increasing allocations to our Capital Plan to help address the needs created by growth and to add to support of communities across Alberta," said McClellan.

The additional capital spending announced with the second quarter update includes support for post-secondary facilities, schools, roads, housing, public transit, community-related facilities and Water for Life projects.

Expense is forecast to be $29.7 billion, a $1.4-billion increase from budget, primarily due to the increase in capital grants and disaster/emergency assistance for agriculture, floods, fires and mountain pine beetles.

Expense is only $47 million higher than the first quarter, as expected lower costs for natural gas rebates largely offset an increase in capital grants.

Over $2.5 billion of the surplus has been allocated to savings, endowments and other funds including
$1.3 billion to the Heritage Fund, $250 million to the advanced education endowment, $500 million to the Alberta Cancer Prevention Legacy Fund and $200 million to the Energy Innovation Fund. The remainder of the surplus has been allocated to the Capital Account and the Sustainability Fund.

Released with the fiscal update were the Alberta Heritage Savings Trust Fund Second Quarter Update and the Second Quarter Activity Report.

Consolidated Heritage Fund investment income is expected to be $1.1 billion, an increase of $243 million from the budget estimate. After a $1-billion deposit, $283 million for inflation-proofing and $250 million for the advanced education endowment, the book value of the Fund on a consolidated basis is forecast to be
$15 billion at the end of the fiscal year, a $1.6-billion increase from March 31, 2006.

The activity report outlines some of the key activities undertaken to support the government's vision of a vibrant and prosperous province where Albertans enjoy a superior quality of life and are confident about the future.

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Attachments: Capital Plan backgrounder

This news release is available on the Alberta Finance homepage at: www.finance.gov.ab.ca

Edmonton...As announced with the Second Quarter Fiscal Update, Alberta's strong fiscal outlook has allowed the province to commit an additional $930 million to Alberta's Capital Plan. This is in addition to the $1.76 billion previously announced in August.

Of the total $2.7 billion in new funding, $895 million will be allocated in this fiscal year, bringing the 2006-07 allocations for capital to $5.1 billion. The remaining $1.8 billion will be provided for capital commitments primarily over the next two years.

Further details of specific projects will follow over the next week.

Alberta's infrastructure spending is unmatched in Canada at more than three times the per capita average of other provinces.

* approximately $265 million of the $1.8 billion will be provided after 2008-09 fiscal year.

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Marie Iwanow
Director of Communications
Alberta Finance
(780) 427-5364

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