September 12, 2002

Debt elimination, balanced budget will remain priorities for government under new fiscal framework

New plan focuses on sustainability, strengthens discipline on government spending

Calgary... The Alberta government will keep debt elimination and balanced budgets as key priorities of its new fiscal framework while at the same time building a fund to ensure financial stability for the province's future, Finance Minister Patricia Nelson said.

"Albertans want this government to keep paying off the remaining provincial debt in an orderly way," Nelson said.  "Under the principles of the new fiscal framework adopted by the Government Caucus, Alberta's debt will still be eliminated far in advance of original projections.  Albertans expect no less."

In the last few years, Alberta has moved 11 years ahead of schedule in paying off the remaining provincial debt.  Since 1994, Alberta has eliminated more than $17 billion of the approximately $22 billion debt.  This has freed up $1.2 billion annually in debt-servicing costs, dollars that have been made available for use in program spending areas such as health and education. During the same time, Alberta has maintained a balanced budget and will continue to do so. "Let's be clear," Nelson said, "we are not going to allow deficits."

"We're now in a position in which provincial assets exceed liabilities, which speaks to the success of our fiscal policies.  But that doesn't mean that debt elimination moves off our radar screen," Nelson said.  The new fiscal framework provides the flexibility to address the province's infrastructure deficit and Albertans' desire to see stability and predictability in government budgeting despite the volatile nature of resource revenues.  The new framework means sudden drops in resource revenue can be managed within the fiscal year.

Highlights of the new fiscal framework, which are based on the recommendations of the Financial Management Commission, include:

• Establishment of a new sustainability fund separate from the Alberta Heritage Savings and Trust Fund.  Each year, all natural resource revenues and government surpluses will be put into the fund.  A total of $3.5 billion will be withdrawn each year to go toward government program spending.  The remainder will stay in the fund to help it grow and ensure stable government spending in years when energy revenues decline.

• All money that has already been set aside for debt retirement will be used for that purpose.

• An annual benchmark for capital spending will be established and allotted in yearly budgets.  This will help eliminate uncertainty about long-range funding for infrastructure projects. There will be no more starts and stops.

• Funding for special capital projects would be assessed on a project-by-project basis, based on a thorough cost benefit analysis. Government will consider different funding options for these projects, including private partnerships, lease agreements or long term financing. However, any alternate funded project would be accommodated within the government's overall fiscal plan.

"Now that government has outlined a framework for fiscal reform, the real work begins," Nelson said. "We've got to work on the details, draft appropriate legislation, and get the new framework up and running.  Deficit budgets are against the law in Alberta, and that will remain the case under this new fiscal framework."

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