News Release - Alberta Finance - Government forecasts positive bottom line despite second quarter challenges

Edmonton... The Government of Alberta is maintaining a balanced budget in the 2002-03 Second Quarter Fiscal Update, but a decline in investment income and continued disaster assistance have reduced the economic cushion to $199 million, $525 million lower than estimated at Budget 2002.

"The government is on track fiscally, despite a difficult second quarter," said Finance Minister Pat Nelson. "The government is no different than any other investor." Investment income is now $1.4 billion lower than the budget forecast. An additional $90 million in forest fire fighting costs and an estimated $252 million decline in federal health and social transfers took its toll on the government’s bottom line.

The revised forecasts in federal transfers and investment income were partially offset by increased forecasts for non-renewable resource and corporate income tax revenue. The second quarter forecast for non-renewable resources increased to $5 billion, almost $1.3 billion greater than the budget estimate. Natural gas prices are now expected to average $3.65 Cdn per thousand cubic feet, up 65 cents from budget. Oil prices are expected to average $26.25 US per barrel, $6.25 higher than budgeted. Corporate income tax revenue is forecast at $2.25 billion, or $700 million higher than the budget estimate.

The revised forecast for the economic cushion also means the contingency reserve for in-year initiatives has been exhausted. First quarter saw $165 million go towards deferred capital projects, teachers' pensions and the Community Initiatives Program. There are no new allocations from the contingency reserve in second quarter.

"We have very little room to work with," said Nelson. "Obviously we’re pleased the natural resource revenue forecast is higher than we expected, but the ups and downs in the stock markets and the unusual weather patterns this year point to the need to be prudent with our fiscal planning."

	2002-03 Budget	2002-03 First Quarter Update	2002-03 Second Quarter Update
Revenue	$19.9 billion	$20.7 billion	$20.5 billion
Resource Revenue	$ 3.7 billion	$ 4.6 billion	$ 5 billion
Expense	$19 billion	$20 billion	$20.2 billion
Oil price (WTI, US$/bbl)	$20.00	$25.50	$26.25
Natural Gas (Cdn$/mcf)	$ 3.00	$ 3.25	$ 3.65
Economic Cushion	$724 million	$531 million	$199 million