The days of predicting the price of crude oil and natural gas revenue to backstop core services such as education and health are over, Finance Minister Pat Nelson said last week after unveiling a $20.8-billion provincial budget that drew a mixed response from the business community.

Nelson’s third budget, which boasted no new taxes or tax increases and a modest corporate tax break, will increase overall spending by nearly five per cent. Nearly $5.5 billion will be pumped toward health facilities, roads and schools.

“Frankly, you cannot deliver core health programs or core education programs based on guessing the price of crude oil and natural gas. That’s not realistic, it’s not fair, and it’s not right,” Nelson told a meeting of the Calgary Chamber of Commerce at the Palliser Hotel on Friday.

Instead, the provincial government will set up a $1.3-billion Sustainability Fund to cushion key programs and services from energy market volatility – spending of oil and gas revenues will be capped at $3.5 billion annually, with additional resource-based revenue directed into the fund.

Pat Nelson

Withdrawals from the fund will only be allowed under certain conditions: if non-renewable resource revenue falls short of $3.5 billion; to offset significant declines of other revenue streams; for emergencies or disasters; or to provide assistance under the Natural Gas Price Protection Act.

The province is forecasting oil and gas prices will average $23.30 US per barrel, with natural gas averaging $4.05 Cdn per thousand cubic feet.

Chamber chairman Ken King said he was pleased to hear about the fund, but expressed disappointment over the “speed to market” of provincial corporate tax reductions.

The budget cut the general corporate income tax rate to 12.5 per cent from 13 per cent, while the small business rate was reduced to four per cent. In addition, the small business income threshold was increased to $400,000 from $350,000. The government estimates the reduction in corporate income taxes will save Alberta businesses $94 million.

The Canadian Taxpayers Federation agreed the cuts to business taxes could have been deeper. Alberta director John Carpay says Premier Ralph Klein has failed to live up to his vow that “the only way taxes are going is down.” Instead, Carpay says, the government raised the health-care premium tax and other fees totalling more than $640 million.

“Every penny” of government spending is taken from taxpayers through either income tax, fuel tax, property tax, business tax or health premiums, Carpay added.

The Fraser Institute criticized the absence of new tax-relief measures, saying this budget could threaten the base upon which the province’s recent economic fortunes have been founded. “The government of Alberta has increased spending yet again in an unsustainable manner at the expense of additional tax relief,” said Jason Clemens, director of fiscal studies.

“Alberta’s fiscal position offered ample opportunity to accelerate previously announced business tax relief and indeed announce additional new personal and business tax relief, but the Alberta government chose instead to pursue an agenda of spending.”

But Nelson said balancing saving and spending is critical in a province dealing with unprecedented growth.

“In the past, we dealt with all our problems with operations by borrowing from capital . . . and the problem built to where that deficit was growing at a fast pace. We were behind on roads, schools and other facilities, and it all becomes a detriment to the Alberta Advantage if we don’t deal with that,” she said.

The province hasn’t lost sight of being the first in Canada to be debt-free, she added. Cash previously set aside for debt reduction will cover all of this year’s debt payments and a portion of next year’s.

“The premier and I would be very, very delighted to make the final payment, or burn the mortgage on this province. That’s our final goal,” she told the applauding audience.