Funding From the Sustainability Fund
Disaster/Emergency Assistance – A total of $915 million is being provided, consisting of:

• $780 million for BSE assistance (Agriculture, Food and Rural Development and Economic Development),
• $128 million for forest fire-fighting costs (Sustainable Resource Development), and
• $7 million for disaster recovery programs (Municipal Affairs).

Natural Gas Rebates – Reflecting the higher rebate level reached in January, the cost has been revised to $216 million, up $35 million from the Second Quarter. Rebates are expected for January, February and March.

Funding From the Contingency Allowance
The $210 million set aside for in-year, non-emergency initiatives is fully committed. Emergencies/disasters, energy rebates, dedicated revenue/expense changes and increases offset by reductions in other program spending are not draws against the Contingency Allowance. The in-year initiatives include $205 million in program expense increases, and $5 million in revenue reduction initiatives.

Ministry Changes

Agriculture, Food and Rural Development expense has increased by $814 million from budget, and $20 million from Second Quarter. BSE-related disaster expense has been revised to $776 million, $18 million less than forecast in the Second Quarter. There is a $38 million increase in dedicated revenue/expense for non-BSE related spending. Total federal agriculture transfers are $454 million higher than budgeted, reflecting BSE assistance, dedicated revenue for specific programs and other increases.

Health and Wellness expense has increased a net $28 million from budget. Increases for facility operations and maintenance costs of health authorities, drug benefit costs and a West Nile Virus initiative are partially offset by decreases in other program areas and dedicated revenue increases.

Human Resources and Employment expense has increased $61 million from budget for caseload and cost-per-case increases. This includes $17 million for the Assured Income for the Severely Handicapped program, $20 million for the Supports for Independence program, and $24 million for the Skills Investments program.

Infrastructure expense has increased by $231 million from budget, including $216 million for natural gas rebates. In addition, $30 million was provided for operations and maintenance costs of schools, which is partly offset by lapsed spending and reallocations to capital investment.

Learning expense has increased $76 million from budget, and $20 million from the Second Quarter. This includes $56 million to address the recommendations of Alberta's Commission on Learning and other basic education pressures, $30 million for post-secondary facility operations and maintenance costs, and $15 million for additional post-secondary entry spaces. These increases are partly offset by a $25 million lapse primarily related to teachers' pensions and the provision for student loans.

Seniors expense has increased $48 million from budget. This includes $22 million for the Alberta Seniors Benefit to assist lower income seniors with increased long-term care fees, $12 million for the Special Needs Assistance program, $8 million for operations and maintenance costs of housing facilities, $5 million for affordable housing, and $1 million for homeless shelters.

Sustainable Resource Development expense has increased $129 million from budget and $16 million from the Second Quarter forecast. With the exception of a $1 million increase in dedicated revenue/expense, the increase is entirely for forest fire-fighting costs.

Other increases from budget include:

• Aboriginal Affairs and Northern Development – $4 million for aboriginal consultation and the Fort McKay First Nation land claim settlement,
• Economic Development – $3.5 million for BSE market recovery strategy,
• Energy – $13 million, primarily for well abandonment costs that are offset by increased industry levies,
• Environment – $3 million increase for the cost of the Western Irrigation District Storm Water Agreement partly offset by other reductions,
• Finance – $9 million for Alberta Capital Finance Authority dedicated revenue/expense increases and for pension liability funding,
• Government Services – $5 million for Utilities Consumer Advocate and land titles costs,
• Justice – $2 million to enhance maintenance enforcement capabilities,
• Municipal Affairs – $11 million for disaster recovery and energy efficiency programs, and
• Solicitor General – $5 million for the organized crime initiative and for Victims of Crime Fund benefits.

Debt Servicing Costs
Debt servicing costs have decreased by $185 million from budget primarily as a result of the appreciation of the Canadian dollar relative to the U.S. dollar. This reduces the cost of debt held in U.S. dollars.

Alberta Sustainability Fund

Sustainability Fund Transfers

• The Fiscal Responsibility Act requires 2003-04 non-renewable resource revenue above $3.5 billion to be transferred to the Sustainability Fund. This transfer is forecast at $3.9 billion, $2.7 billion higher than the budget estimate.

• Withdrawals from the Fund are permitted to pay for the $915 million cost of emergencies and disasters and $216 million in rebates under the Natural Gas Price Protection Act.

• Other net transfers to the Fund, totaling $793 million, consist of:
• $685 million increase in revenue (excluding non-renewable resource revenue, a $60 million increase in dedicated revenue and expense and $5 million in revenue reduction initiatives),
• $185 million in savings from the reduction in debt servicing costs,
• less $77 million from a net increase in capital cash requirements and the change in financial assets of funds and agencies.

Cash Adjustments

• Cash adjustments reflect the differences between accrued revenue and cash receipts, non-cash expenses, and transfers of cash not reported in the income statement. In 2003-04, cash adjustments increase the net transfers to the Sustainability Fund by $678 million.

• This positive cash adjustment primarily relates to the natural gas royalties. As there is a three-month delay in receiving the cash from natural gas royalties, the difference between accrued amounts and cash received can be significant when natural gas prices spike in the January to March period. The positive cash adjustment reflects higher prices in January to March 2003 than forecast for January to March 2004.

Assets of Sustainability Fund

• Net assets of the Sustainability Fund, prior to reallocation, are forecast at $4.3 billion, $2.1 billion higher than estimated in Budget 2003.

• Sustainability Fund assets above the $2.5 billion target can be reallocated to other parts of the balance sheet.

• Based on the third quarter forecast, close to $1.8 billion will be reallocated from the Sustainability Fund at the end of the fiscal year. The Debt Retirement Account and the Capital Account are each expected to receive $893 million, leaving $2.5 billion in the Sustainability Fund.

Capital Plan

• Capital asset acquisitions, including capital grants to local authorities and capital investment in provincial government-owned projects, are currently forecast at $1.64 billion. This is $36 million lower than the budgeted Capital Plan. This primarily reflects revised scheduling of projects.

• Changes in the Capital Plan include:
  • General Government Capital – $38 million increase, including:
    • $13 million for the FireNet Telecommunications System (Sustainable Resource Development),
    • $4 million for development of a new Apprenticeship, Trade and Occupation Management System (Learning),
    • $3 million for constructing and equipping laboratory facilities to support enhanced food safety surveillance, to be completed in 2004-05 (funded from the Sustainability Fund), and
    • $18 million in other changes, including net transfers from operating expense to equipment/inventory purchases.
      
  • Provincial Highway Network – $11 million increase for pavement rehabilitation and construction.
  • Municipal Transportation Grants – $17 million reduction due to reprofiling.
  • Health, School, Post-secondary and Water and Wastewater Management Facilities – $38 million reduction due to revised project schedules.
  • Housing – $8 million increase primarily for funding under the Canada/Alberta Affordable Housing Agreement.
  • Other Infrastructure – $38 million decrease mainly due to a $31 million delay in Alberta SuperNet spending.
    
• Further details on Capital Plan spending by ministry are reported on below.

Net Financial and Capital Assets

• Net Assets – The government of Alberta's net assets are forecast at $20.4 billion as of March 31, 2004. This includes capital assets of $10.5 billion.

• Accumulated Debt – Accumulated debt, net of cash set aside in the Debt Retirement Account, is forecast at $3.7 billion as of March 31, 2004. This is a reduction of $1 billion from March 31, 2003. The reduction reflects the $893 million allocation to the Debt Retirement Account and a $129 million reduction in the value of debt held in U.S. dollars due to the appreciation of the Canadian dollar.

• Capital Account – The value of the Capital Account is forecast at $1.18 billion as of March 31, 2004. These dollars will be used to pay for capital projects over the next three years. During the 2003-04 fiscal year, $623 million is being withdrawn from the Capital Account to pay for capital projects – $416 million for capital grants to local authorities and $207 million for provincial government-owned projects. More than offsetting these payments is an $893 million transfer this year from the Sustainability Fund to the Capital Account.

• Heritage Fund – The balance sheet reflects the book value of Heritage Fund external investments at $11.3 billion. It does not include unrealized capital gains. The estimated fair market value of Heritage Fund assets at December 31, 2003 was $12.4 billion. Similarly, endowment funds are recorded at book value, not fair market value.

• Pension Obligations – Pension obligations are forecast at $5 billion. They are scheduled for elimination under a separate legislative plan and are not subject to the Fiscal Responsibility Act.

Actual Results

For the first nine months of 2003-04