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‘While Alberta is in a good financial position now, we all know how much our revenues can fluctuate in a short period of time,’ Finance Minister Doug Horner says

Jason Franson/The Canadian Press

Higher oil prices, strong tax revenues and the weakening Canadian dollar have helped the Alberta government move its current operating budget toward a year-end surplus. But even as the government claims fiscal progress, it continues to accumulate billions in debt to fund what it says are badly needed roads, bridges, schools and hospitals in the fast-growing province.

With strong job, economic and population growth – and a gusher of revenues from oil and gas royalties – Alberta is in an enviable position compared to other provinces. However, a promise of no new taxes, over-budget spending and volatility in oil and gas prices means the province's financial footing remains wobbly.

"We're turning the corner. But we know we must still be careful about what lies ahead," Finance Minister Doug Horner said on Wednesday of the province's third quarter results for the 2013-14 fiscal year.

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Although the 2013-14 budget predicted a $451-million operating deficit for the year, the fiscal update shows the province had an operating surplus of $1.2-billion by the end of the third quarter, a figure the government expects will reach $1.4-billion by the end of the fiscal year next month.

The government attributed the change in fortunes to higher-than-predicted crude prices, higher investment income, strong tax revenues and the gradual weakening of the Canadian dollar in late 2013, which helped Alberta oil producers paid in U.S. currency. The government also said the "bitumen bubble" – the discount price Western Canadian producers must accept for their heavy, transport-challenged crude – eased in 2013. The province said it will be able to replenish almost completely the province's $5-billion contingency fund, which was designed to help ride out volatile energy prices, and has been heavily drawn down in recent years.

There's no doubt that Alberta's fiscal outlook is better than it was a year ago. But by how much remains a debate.

Spending is up, and $1.1-billion over budget. Alberta has already spent $537-million to rebuild after last June's massive floods – and is counting on a $1-billion infusion from Ottawa by the end of March. The province also put extra money into health care, social programs, post-secondary institutions and schools in late 2013.

The opposition Wildrose party has lambasted the Progressive Conservative government because, even in an era of high oil prices, it continues to borrow to build. Spending for infrastructure was up in the third quarter and total capital debt stands at $8.5-billion.

"If you have a true consolidated surplus, you don't need to borrow money to pay for your annual expenditures," Wildrose finance critic Rob Anderson told reporters.

He also criticized the government for what he called "voodoo, Enron-accounting" methods in which the government divides operational, capital and saving categories – allowing it to claim no deficits on the operational side while accumulating debt on the capital side. Mr. Anderson said the new format, introduced in last year's budget, intentionally confuses the numbers.

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Operational spending is what the government pays for such things as health care, social services and public sector salaries. Capital spending is for building projects, such as roads, bridges and schools.

The government acknowledges that under its old budget format – now referred to as "Ralph's system," for former premier Ralph Klein, still revered for his fiscal conservatism – the consolidated deficit for the third quarter would be $335-million. Mr. Anderson and the Canadian Taxpayers Federation argue the true figure is in the billions.

Next week, the Alberta legislature resumes, and the government will deliver the 2014-15 budget. It will follow several weeks in which Alberta Premier Alison Redford has faced intense criticism for a $45,000 trip to South Africa for Nelson Mandela's funeral, and Edmonton Fairmont hotel expenses filed by her executive assistant.

A member of her caucus, former whip Steve Young, told the Calgary Herald the $45,000 is "inconsistent with Alberta values." Ms. Redford, who had already apologized for the cost of the trip, said last week that Mr. Young's concerns were valid.

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