Accountability Statement
Message from the Minister of Finance
Preface
Executive Summary

June 28, 2001
Edmonton, Alberta

Report also contains Consolidated Financial Statements and Measuring Up.  If you would prefer to download any or all of these documents as pdf files, click here.

Table of Contents

• Accountability Statement
• New Century. Bold Plans. - A Message from the Minister of Finance
• Preface
• Executive Summary - New Century. Bold Plans.
  • Overview of Results
  • Achieving Goals
  • Financial Results - Managing the Dollars
  • Looking Ahead

Accountability Statement

The government’s Annual Report for the year ended March 31, 2001 was prepared under my direction on behalf of the government in accordance with the Government Accountability Act and the government’s accounting policies. All of the government’s policy decisions as at June 20, 2001 with material economic or fiscal implications have been considered in the preparation of the Annual Report.

[original signed]

Patricia L. Nelson
Minister of Finance

In keeping this government’s commitment to be open and accountable, we provide an annual report at the end of each fiscal year to show our financial and performance results. The actual results are compared to the estimates and targets established in the previous year’s budget. This lets Albertans see if we accomplished what we set out to do.

Budget 2000 was a bold plan for a new century. It focused on priorities Albertans had previously established and built on them. These priorities included paying down the debt, lowering taxes, and protecting and improving programs that mattered most to Albertans like health care, education and building an even stronger economy.

This past year, Alberta saw changes either announced or implemented to personal, business and school property taxes that will leave more money in the pockets of taxpayers.

A significant step was taken on January 1, 2001, as Alberta moved to the single-rate tax. The 10 per cent single tax rate will save Albertans more than $1.1 billion in personal income taxes in 2001. By raising the personal, spousal and equivalent-to-spousal exemptions to $12,900, Albertans can earn more money without paying any provincial income tax at all. As a result of these changes, over 200,000 additional lower income Albertans will be removed from the provincial tax rolls. This date also saw $135 million cut from education property taxes, with the revenue frozen for future years.

In September 2000, business tax cuts were announced. In 2001-02, businesses will save $286 million in taxes. When the plan is fully implemented, over the next four years and subject to affordability, business will save $1 billion.

These changes solidify Alberta’s position as the lowest overall taxed province in Canada. They also make our province competitive internationally as we step into a new century.

DEBT REDUCTION

In 1999-2000, we celebrated the elimination of the net debt and became the first province to own more than it owes. This fiscal year, we took the first step in eliminating our remaining debt. Due to record resource revenues in 2000-01, we were able to allocate debt payments of over $5 billion. The allocation will reduce the accumulated debt to $6.6 billion, which is about a $300 million improvement from the third quarter fiscal update. This puts us nine years ahead of our legislated 25-year payment schedule. Lower debt will also mean lower debt servicing costs. This is money that will be forever freed up to use on Albertans’ priorities.

PRIORITY SPENDING

Because of strong economic and population growth, there were increased demands on the infrastructure and services of the province. This past year saw increases in funding for health, education, transportation and other infrastructure as well as other one-time spending initiatives funded from record resource revenues.

Along with tax reductions and debt elimination, education and health are areas that Albertans have listed as priorities through a variety of consultations. In fact, in 2000-01, 58 per cent of government spending was on health care and education and included funding for new schools, hospitals, medical equipment and staff.

As the province benefited from high resource revenues, Albertans shared more than $1 billion in refunds and rebates to help with the higher energy-related costs. Farmers and ranchers also received benefits to help address their specific concerns.

With a strong economy, there comes opportunities for Albertans. Over the past year nearly 35,000 jobs were created and Alberta had the lowest unemployment rate since 1981.

We had the highest disposable income per capita in Canada, growing by over seven per cent in 2000-01. A strong economy and tax cuts give Albertans even more freedom to choose how they want to spend, save or invest their money.

Alberta is in a great position to keep building on the bold plans set out in Budget 2000. Our government knows it cannot depend on record resource revenues every year. However, by staying on track with our commitments to the Fiscal Responsibility Act and to the people of Alberta, we will continue to respond to the needs of our province in the future.

[original signed]

Patricia L. Nelson
Minister of Finance

The Public Accounts of Alberta are prepared in accordance with the Financial Administration Act and the Government Accountability Act. The Public Accounts consist of the annual report of the Government of Alberta and the annual reports of each of the 18 ministries.

This annual report of the Government of Alberta contains the Minister of Finance’s accountability statement, the consolidated financial statements of the province and a comparison of the actual performance results to desired results set out in the government’s business plan, including the Measuring Up report.

On March 15, 2001, the government announced new ministry structures. Since the 2000-01 fiscal year was substantially completed prior to this announcement, ministry annual reports and financial statements are being prepared as if the restructuring took place on April 1, 2001, to provide proper accountability for the 2000-01 fiscal year against the original business plan.

The annual reports of ministries, released in the fall of each year, contain ministers’ accountability statements, the audited consolidated financial statements of the ministries and a comparison of actual performance results to desired results set out in the ministry business plan. Each ministry annual report also includes:

• financial statements of entities making up the ministry including departments (all departments combined form the General Revenue Fund), regulated funds, provincial agencies and Crown-controlled corporations.
• other financial information as required by the Financial Administration Act and Government Accountability Act, either as separate reports or as part of financial statements, to the extent that the ministry has anything to report.
• financial information relating to accountable organizations and trust funds.

The Government of Alberta Annual Report is comprised of two parts:

• Consolidated Financial Statements, which provide an overall accounting of the Government’s revenue and spending, and assets and liabilities.

• Measuring Up, which reports on the progress achieved on core government performance measures.

Annual reports for each ministry are published in September and provide additional detailed information on performance and financial results.

OVERVIEW OF RESULTS

Budget 2000 – New Century, Bold Plans, shifted the focus to the future. Within a framework of sound fiscal management and debt repayment, the budget set out the following priorities:

• Strengthening Alberta’s tax advantage.
• Implementing a new economic strategy that builds upon traditional strengths and new knowledge-based industries.
• Improving the quality and accessibility of health, education and other key services.

These commitments were met.

• The budget was balanced and $6.4 billion was allocated to repaying debt and increasing the financial assets of the province. This included $500 million to establish a new science and engineering research endowment fund.
• The debt allocation will allow accumulated debt to be cut nearly in half to $6.6 billion.
• Personal income taxes, school property taxes and user fees were cut. A commitment was made to reduce business taxes by $1 billion over four years, subject to affordability.
• A new single-rate personal income tax plan was implemented on January 1, 2001.
• Infrastructure funding was accelerated to meet the requirements of Alberta’s growing population and economy.
• Albertans were assisted with high energy costs. Assistance was provided to ranchers and farmers to help them with unpredictable world markets, poor weather and income pressures.
• The Six Point Plan to protect and improve public health care was implemented.
• Actions were taken to improve the quality and accessibility of education.

Fiscal Responsibility

• The budget was balanced for the seventh year in a row. $5.4 billion was allocated to repaying debt and $1 billion was used to establish a new science and engineering endowment fund and other balance sheet improvements.
• High energy prices increased revenue to a record $25.6 billion, $6.5 billion higher than budgeted.
• Higher revenues resulted in a larger-than-budgeted economic cushion, of which nearly 80% was used to repay debt and increase the financial assets of the province.
• The Fiscal Responsibility Act requires the province’s accumulated debt to be eliminated by 2025. With the 2000-01 debt allocation, the province is nine years ahead of schedule.
• Continued high energy prices could allow accumulated debt to be eliminated in just a few years. With this possibility, Albertans were asked in the It’s Your Money survey what their priorities will be when Alberta is debt free.

Alberta’s Economy

• In 2000, the Alberta economy grew by an estimated 6.1%, the highest growth among provinces.
• Employment grew by 2.2% or 34,900 new jobs. Alberta’s unemployment rate averaged 5% in 2000, the lowest rate since 1981 and almost 2 percentage points lower than the national rate of 6.8%.
• Alberta had the highest personal disposable income per capita among provinces in 2000. Strong growth in personal income, the elimination of the provincial surtax and provincial tax rebates contributed to 7.1% growth in personal disposable income.
• Strong economic and population growth placed increased demands on Alberta’s infrastructure. In 2000-01, the province accelerated infrastructure funding, providing over $2 billion for health facilities, schools, post-secondary institutions and other infrastructure.
• The province has increasingly focused on supporting knowledge-based and other value-added industries. A new $500 million endowment fund was created to support research in science and engineering. This endowment fund, in combination with other initiatives, is attracting a critical mass of researchers and companies in a wide range of industry sectors to Alberta.
• About $700 million in assistance was provided to farmers and ranchers in the 2000 crop year to help address risks of unpredictable world markets, poor weather and income pressures. Crop insurance premiums were reduced by 30%. The government also continued to support the sustainable growth and diversification of Alberta’s agriculture sector through initiatives such as Ag Summit 2000.
• $1.2 billion in energy cost assistance was provided to Albertans and Alberta businesses in 2000-01. This included the first installment of the $690 million Energy Tax Refund ($345 million in 2000-01 and a further $345 million in 2001-02). An additional $2 billion in electricity assistance was provided in 2001 through proceeds from the Power Pool auctions.

Alberta's Tax Advantage

• Changes were made to the tax system in 2000-01 that strengthen the province’s position as the lowest taxed jurisdiction in Canada and make Alberta more competitive internationally.
• The introduction of the single-rate personal income tax system was accelerated. On January 1, 2001, Alberta moved to a single rate of 10%. The personal, spousal and equivalent-to-spousal exemptions were increased to $12,900. Albertans will save $1.1 billion in 2001, bringing the total personal income tax cut since 1998 to $1.5 billion or 23%.
• In September 2000, the Alberta Business Tax Review Committee recommended business tax cuts to ensure that Alberta remains globally competitive. Based on these recommendations, the government has introduced a schedule of tax reductions that will save business $1 billion by 2004-05. Subject to affordability, the general corporate income tax rate will be reduced from 15.5% to 8%, the small business rate will drop from 6% to 3% and the small business income threshold will rise to $400,000 from $200,000. The first phase was implemented on April 1, 2001.
• In January 2001, the government delivered a major and on-going cut in school property taxes. The amount of school property tax revenue, including tax revenue collected by opted-out school boards, was reduced by $135 million and frozen at the reduced level of $1.2 billion.

Health

• Implementation of the Six Point Plan to protect and improve public health care proceeded in 2000-01. Health spending increased by 11.6% over the previous year to $5.9 billion.
• Increased funding was provided to address waiting times for diagnosis and treatment for procedures such as joint replacement, open heart surgery, angioplasties, cancer treatment and renal dialysis.
• Long-term care and home-care services were expanded.
• A two-year agreement was negotiated with the Alberta Medical Association which provides for increased fees for physician services, an increase in the number of physicians providing services to Albertans and the introduction of an "on-call" program for specialists. Funding was also provided to help recruit and retain specialists providing Province-Wide Services in the health system.
• A new $10 million endowment fund was created to support ongoing professional development and lifelong learning by registered nurses.
• A commitment was made to provide $1.5 billion (for 2000-04) for health care facilities and equipment. In 2000-01, this included $161 million to assist in the acquisition of medical equipment, including MRIs and other advanced medical equipment, and approximately $280 million to develop and upgrade health facilities.

Education

• Spending on basic and post-secondary education increased by 6.1% over the previous year to $5 billion.
• The new Alberta Initiative for School Improvement gave school boards the ability to undertake a range of improvement strategies such as early reading or numeracy interventions, smaller class sizes, and stay-in-school programs. Funding was also provided to increase the number of kindergarten hours.
• Amiskwaciy Academy, a pilot project aimed at better meeting the educational needs of Aboriginal students living in an urban environment, opened its doors in Edmonton on September 2000.
• Funding for post-secondary institutions was increased to help provide new entry spaces for students, with an emphasis on nursing, health technology, physicians, information and communication technology, and apprenticeship and industry training programs.
• The new Jason Lang Scholarship assisted almost 2,800 first-year undergraduate students. In addition, almost 9,000 awards were provided through the Alberta Heritage Scholarship Fund.
• A $1.3 billion New Century Schools Plan (for 2000-04) was announced to address high priority needs for new schools and school modernization.
• Over $440 million was committed (for 2000-04) to upgrade post-secondary facilities and equipment.

Other Initiatives

• In response to the recommendations of the Children’s Forum and the Report of the Task Force on Children at Risk, spending on services for children and their families increased by over 14%. This included increases for handicapped children’s services and early intervention programs.
• Environmental initiatives included research funding to address greenhouse gas concerns and the effects of flaring on human and livestock health, new gas plant proliferation and flaring guidelines, and actions to remediate contaminated underground petroleum storage tank sites.
• Detailed planning began for two proposed Health Research Innovation Centres at the University of Alberta and the University of Calgary.
• A First Nations Gaming Policy was approved which will guide the future development of casino operations by First Nations and the disposition of net revenues from the operation of those casinos.
• Alberta’s 2005 Centennial Program was launched with $50 million for Alberta Centennial Legacy projects.
• The Seniors’ Supportive Housing Incentive Program was implemented.

ACHIEVING GOALS

Measuring Up is the government’s annual report on the progress that has been made towards achieving our goals. The report tracks progress on each of the government goals by assessing whether we are measuring up to the targets set out in the government’s three-year business plan for a set of core performance measures.

This year’s Measuring Up reports on the goals, core measures and targets set out in the Government of Alberta Business Plan 2000-03 as part of Budget 2000 – New Century, Bold Plans. The report points out areas where good results have been achieved and other areas where improvement is needed.

People

• Albertans will be healthy – Alberta continued to rank among the top countries in the world for life expectancy. There was no significant change in the percentage of Albertans aged 18-64 who rated their health as "very good" or "excellent". The percentage of Albertans aged 65 and over who rated their health as "good", "very good", or "excellent" decreased slightly over the previous year. There has been an increase in the percentage of Albertans rating access to health services as "a bit difficult" or "very difficult".
• Our children will be well cared for, safe, successful at learning and healthy – Fewer children were economically disadvantaged compared to children in other provinces, based upon preliminary 1997 data for the Market Basket Measure of low income.
• Alberta students will excel – Alberta ranked third among the provinces in terms of high school completion for Albertans aged 25 to 34. However, Alberta ranked fifth in terms of post-secondary completion. Alberta students continued to perform well on cross-Canada and international achievement tests.
• Albertans will be independent – Average annual family incomes have generally increased and fewer Alberta families had incomes of less than $20,000 in 1998.
• Albertans unable to provide for their basic needs will receive help – In comparison to other provinces and based upon preliminary 1997 data for the Market Basket Measure of low income, the majority of Albertans were able to provide for their basic needs.

Prosperity

• Alberta will have a prosperous economy – Alberta’s economy was strong. The province’s long-term average growth rate surged due to a sharp increase in 2000’s Gross Domestic Product. Job creation proceeded at a robust pace.
• Our workforce will be skilled and productive – The majority of Alberta employers surveyed were satisfied with the skill level of recent degree and diploma graduates. Alberta’s labour productivity rose and remained the highest among the provinces.
• Alberta businesses will be increasingly innovative – The use of the Internet by Alberta businesses to buy and sell goods and services will be presented next year as an indication of businesses adopting innovative practices to remain competitive.
• Alberta’s value-added industries will lead economic growth – While the value of Alberta’s manufacturing sector grew, it continued to account for a steady share of Alberta’s economy compared to the previous year. Alberta’s knowledge-intensive manufacturing and services industries have been expanding.
• Alberta will have effective and efficient infrastructure – Alberta’s infrastructure was expanded and improved to accommodate the increased demand from strong economic growth. Most of the rural sections of the National Highway System provided good traffic flow and gas pipelines were able to accommodate throughput demand. Industry and non-profit organizations made increasing use of Alberta’s university research facilities. However, proportionately greater contributions by the provincial and federal governments to sponsored research reduced the percentage contributed by non-government organizations to total sponsored research.
• Alberta will have a financially stable, open and accountable government – The Alberta government continued to maintain a strong financial position. Alberta was the only province to have a triple A credit rating, the highest possible rating. The overall tax burden on persons was the lowest among the provinces. The province was ahead of schedule on accumulated debt reduction and was in an overall net asset position. Provincial government expenditure was higher than the previous year, slightly above our interprovincial target.
• Alberta will have a fair and safe work environment – Alberta ranked fourth lowest among the provinces for person-days lost due to work stoppages and third lowest for workplace injury and disease, down from the previous year’s rankings.
• Alberta businesses will increase exports – Alberta commodity exports surged due to higher prices and volumes.

Preservation

• Alberta will be a safe place to live and raise families – Although Alberta’s crime rates dropped, they remain above national rates. The gap between Alberta’s violent crime rate and the national rate narrowed last year, while the gap between Alberta’s property crime rate and the national rate widened. Alberta had the lowest rates among the western provinces last year and its youth crime rates continued to decline.
• Alberta’s natural resources will be sustained – Alberta’s forest resources continued to be managed on a sustainable basis, but land productivity has fallen owing to dry conditions in much of southern and central Alberta.
• The high quality of Alberta’s environment will be maintained – The overall quality of Alberta’s environment remained good. There were no days of poor air quality last year, and water quality downstream of Calgary, Edmonton and Lethbridge improved.
• Albertans will have the opportunity to enjoy the province’s natural, historical and cultural resources – Albertans continued to have the opportunity to enjoy the province’s museums, historic sites and interpretive centres and provincial parks and recreation areas. Visitation has remained relatively constant over the past few years.
• Alberta will work with other governments and maintain its strong position in Canada – The Alberta government’s approval ratings on federal-provincial relations was higher than the average approval rating of four other provinces (Ontario, Manitoba, Saskatchewan and British Columbia).
• The well-being and self reliance of Aboriginal people will be comparable to that of other Albertans – This new goal focuses on the significant socio-economic disparities between First Nations, Metis and other Aboriginal communities and other Albertans that need to be addressed.

Complete details on these and other measures are provided in the Measuring Up section of this Annual Report. Additional information on performance measures tracked by various ministries will be provided in their annual reports, available in the fall.

FINANCIAL RESULTS - MANAGING THE DOLLARS

As a result of strong energy prices in 2000-01, the government was able to make a large payment on its debt and provide additional funding for key initiatives.

Nearly 80% of the larger-than-budgeted economic cushion was used for debt repayment/increase in financial assets and about 20% or $1.7 billion was used for in-year initiatives.

In-year initiatives consisted of:

• $535 million in revenue reductions. This included $345 million for the Energy Tax Rebate and the remainder for reductions in personal income taxes, school property taxes and crop insurance premiums.
• $1.17 billion in spending increases. This included energy cost assistance, accelerated infrastructure funding, farm income assistance, and increases for health and children’s services.

Debt Repayment and Increase in Financial Assets

The $6.4 billion allocation in 2000-01 for debt repayment/increase in financial assets was composed of:

• Approximately $5.4 billion to repay accumulated debt including:

• $2.2 billion repayment of debt maturities.
• $1.6 billion set aside in a special account to repay accumulated debt as it matures in the future. With the $470 million allocation in 1999-2000, the total in this account is $2.1 billion.
• $1.6 billion in accrued revenues, primarily related to high natural gas royalties in the last quarter of 2000-01. This cash will become available in 2001-02 for accumulated debt repayment.

• $0.5 billion to establish the Alberta Science and Engineering Research Endowment Fund, as allocated in the budget.
• $0.5 billion in other balance sheet improvements, primarily retained income of the Alberta Treasury Branches, endowment funds and other funds and agencies.

As a result of these allocations, the province’s net assets increased to $9 billion (assets minus liabilities, excluding pension obligations).

Revenue

Total provincial revenue reached a record $25.6 billion in 2000-01. This was $5.4 billion, or 26.9%, higher than in 1999-2000. The increase was due to stronger energy prices.

• Non-renewable resource revenue reached a record $10.6 billion in 2000-01. This was $5.9 billion higher than in 1999-2000. A sharp rise in natural gas prices was the main contributing factor. Natural gas prices averaged Cdn$6.08 per thousand cubic feet, more than double the previous year average of Cdn$2.66. Oil prices also rose, from an average of US$23.16 per barrel in 1999-2000 to US$30.19 in 2000-01. Revenues from bonuses and sales of Crown leases increased due to improved industry cash flow.
• Tax revenue declined by 2.5% or $221 million from 1999-2000 to 2000-01.

Personal income tax revenue fell in 2000-01 by 22.7% or $1.2 billion. This reflected the $345 million Energy Tax Refund, personal income tax cuts and a negative prior year adjustment.

Offsetting most of this decline was a strong recovery in corporate income tax revenue and continued growth in other tax revenues. After declining by 32% over the two previous years, corporate income tax revenue rebounded – increasing by 61.2% or $768 million in 2000-01. A sharp rise in corporate taxable income, largely due to the strength of the energy industry, was responsible for the increase. Other tax revenue increased by 7.1% or $168 million.

• Transfers from the Government of Canada increased by 10.3% or $169 million. The September 2000 First Ministers Meeting resulted in additional federal funding for health care and children’s services. This was partly offset by lower federal transfers for agriculture assistance. Federal transfers accounted for 7% of Alberta’s total revenue.
• Total investment income fell by 29.2% or $556 million. The decline reflected the weakness in the equity markets in 2000-01 and the significant capital gains that were realized in the previous year.
• Revenue from all other sources increased by 3% or $97 million. This largely reflected higher revenues from lottery operations, partly offset by lower net income from Alberta Treasury Branches. 

Addressing Albertans' Program Priorities

Total spending (excluding the change in unfunded pension obligations) increased by 9.5% or $1.6 billion from the previous year. The increase primarily reflected higher health and education spending, and one-time initiatives to address high energy costs and accelerate infrastructure funding.

In total, $19 billion was spent in 2000-01 for programs and services and paying interest on debt. Health and education accounted for 58% of total spending. Major changes in spending from 1999-2000 on a functional basis were:

• Health spending increased by $614 million or 11.6% over last year to $5.9 billion. This additional spending supported the increased costs of drugs and health services, wage settlements and initiatives to improve access to health care, including improvements in health care facilities and equipment.
• Education spending increased by $291 million or 6.1% over last year to $5 billion. Operating grants were increased for both basic and post-secondary education to cover rising costs and enrollment. The construction and modernization of schools and post-secondary facilities was accelerated.
• Social Services spending increased by $71 million or 4.1% over last year to $1.8 billion. Major increases for children services, persons with developmental disabilities and seniors’ programs were partly offset by lower increases and reductions in other areas.
• Transportation and Utilities spending increased by $532 million or 47.7% over last year to $1.6 billion. The increase reflects the cost of energy assistance programs, partly offset by a delay in some transportation initiatives.
• Agriculture and Economic Development spending increased by $31 million or 2.9% over last year to $1.1 billion. Spending reflects the special agriculture assistance programs provided over the last two years.
• Other Program spending increased by $80 million or 3.3% to $2.5 billion. Higher spending for justice programs and funding for Alberta Centennial projects was partly offset by lower forest fire fighting costs.
• Debt Servicing Costs increased by $24 million or 2.5% to $980 million. Interest cost savings due to repayment of debt were offset by increased foreign exchange provisions on debt held in U.S. dollars.

LOOKING AHEAD

Alberta was able to take a major step forward in 2000-01. Record high resource revenues will allow the elimination of nearly half of Alberta’s accumulated debt. If energy prices remain high, Alberta could become debt-free in just a few years. The process of defining what a debt free Alberta could look like began with the It’s Your Money survey in November 2000 and will continue with the upcoming Future Summit.

In 2000-01, Alberta was able to enhance its tax advantage with the implementation of a new single-rate personal income tax system and a reduction in school property tax rates. This tax advantage will be strengthened with the planned $1 billion cut in business taxes over the next four years, of which the first phase was implemented on April 1, 2001.

The government was also able to meet its commitments to provide quality program services, address the infrastructure requirements of the province’s growing economy and population, and meet the need for special agriculture and energy shielding assistance.

These commitments were met within a framework of overall fiscal responsibility. The government will continue to ensure that the dollars allocated to permanent tax reductions and ongoing increases in base program spending are affordable not just in the current year, but also in future years.

Again next year, the government will report completely and openly on what was achieved – both in achieving the goals that were set and in managing the province’s finances.

Throughout the 2001-02 fiscal year, Albertans will receive regular quarterly reports on the government’s fiscal situation and activities. As well, the government will continue to review and update performance measures to ensure they provide an accurate picture.

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