February 19, 2008
Government releases 2007-08 Third Quarter Fiscal Update
2007-08 Third Quarter Fiscal Update Highlights:
- Revenue forecast at $38 billion, an increase of $435 million from second quarter and $2.7 billion from budget
- Expense forecast at $33.8 billion, an increase of $289 million from second quarter and
$701 million from budget
- Surplus (excluding increased pension obligations) forecast at $4.2 billion, an increase of
$146 million from second quarter and $2 billion from budget.
- $834 million of cash is available for allocation in the third quarter. One-third is allocated to the Heritage Fund and two-thirds to the Capital Account
Edmonton... The Alberta government released the 2007-08 Third Quarter Fiscal Update, as mandated by the
Government Accountability Act. The Act requires the government to report to Albertans on the province’s fiscal position by February 28.
The 2007-08 surplus is forecast at $4.2 billion, a $2-billion increase from budget and $146 million higher than the second quarter forecast, before taking into account increases in pension obligations.
In January, an agreement with teachers resulted in the government assuming their $2.2 billion pre-1992 obligation for the Teachers’ Pension Plan. Including increases in pension obligations, the surplus is forecast at $1.8 billion. These pension obligations are not a cash requirement and do not affect the 2007-08 surplus allocations.
After cash adjustments, $834 million is available in the third quarter to be allocated according to the in-year surplus policy. Two-thirds, or $556 million, is being allocated to the Capital Account and one-third, or $278 million, is being allocated to the Heritage Fund.
Total savings in 2007-08 are forecast at $1.9 billion:
- $1.6 billion is being saved in the Heritage Fund. This includes a total allocation of $1.1 billion under the in-year surplus policy and $451 million for inflation-proofing;
- $227 million is being deposited in the Heritage Scholarship Fund as announced in June 2007; and
- $150 million was originally budgeted to be deposited in the Medical Research Endowment Fund.
Expense is forecast to be $33.8 billion, an increase of $701 million from budget and $289 million higher than forecast at second quarter. The increase from budget includes higher capital grants and increased disaster/emergency assistance for floods, forest fires and mountain pine beetle infestations.
Revenue is forecast to be $38 billion, a $2.7-billion increase from budget and a $435-million increase from the second quarter forecast. The increase is primarily due to higher income tax revenue, which is $2.1 billion higher than budget largely because of stronger growth in personal income and corporate taxable income.
Resource revenue is forecast at $11 billion, an increase of $704 million from budget, but an $88-million decline from second quarter. This reflects higher oil prices partly offset by lower-than-expected natural gas prices and the impact of a higher Canadian-U.S. dollar exchange rate.
The oil price forecast has been revised to US$79.82 per barrel for the fiscal year, up almost US$22 from budget, but essentially unchanged from second quarter. The average price-per-barrel from April 2007 to January 2008 was US $78.66 per barrel. Natural gas prices are forecast to average Cdn$5.85 per gigajoule, 90 cents less than budgeted and 15 cents less than the second quarter forecast. The average price from April 2007 to January 2008 was Cdn$5.71 per gigajoule.
The Canadian dollar is forecast to average 96.9 cents US for the entire fiscal year, up nearly 11 cents from budget.
The Alberta Heritage Savings Trust Fund 2007-08 Third Quarter Update was released with the 2007-08 Third Quarter Fiscal Update. The Heritage Fund is forecast to have realized net income in 2007-08 of $1.15 billion, a decrease of $69 million from budget, mainly due to lower equity market returns and the higher Canadian dollar relative to the U.S. dollar. At December 31, 2007, the Heritage Fund market value was $16.6 billion, an increase of $497 million from September 30, 2007.
Summary ($ millions)
Budget
2007-08
3rd Quarter Forecast
Change from Budget
Change from
2nd Quarter
Revenue
$35,332
$37,984
$2,652
$435
Non-Renewable Resource Revenue
$10,260
$10,964
$704
($88)
Total Expense
$33,062
$33,763
$701
$289
Operating Expense
$27,019
$27,175
$156
$220
Surplus (excluding changes in pension obligations)
$2,270
$4,221
$1,951
$146
Sustainability Fund
$7,653
$7,653
-
-
Oil Price (WTI US$/bbl)
$58.00
$79.82
$21.82
($0.18)
Natural Gas Price (Cdn$/GJ)
$6.75
$5.85
($0.90)
($0.15)
Exchange Rate (US¢/Cdn$)
$0.86
$0.969
$0.109
($0.018)
Fiscal Year Sensitivities
Annual Change
Impact on Revenue
(millions of dollars)
Oil Price (WTI US$/bbl)
-$1.00
-139
Natural Gas Price (Cdn$/GJ)
-10¢
-98
Exchange Rate (US¢/Cdn$)
+1¢
-123
-30- The 2007-08 Third Quarter Fiscal Update and the Heritage Fund Third Quarter Update are available online at
www.finance.alberta.ca
Media inquiries may be directed to:
Jay O’Neill
Alberta Finance
780 427 5364
To call toll free within Alberta dial 310-0000.
This news release is available on the Alberta Finance homepage at:
www.finance.alberta.ca
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