Budget 2007 Addresses Alberta’s Price of Prosperity
April 19, 2007
~ 14th consecutive balanced budget; $2.2 billion estimated surplus
~ $18.2 billion for infrastructure over three years, including $3 billion for health facilities and equipment and $1.3 billion for schools
~ Phase-in of a new $1.4 billion Municipal Sustainability Initiative
~ 10 per cent operating spending increase to address growth pressures and improve services
~ Nearly $200 million in annual income tax savings for Albertans and $22 million for businesses in 2007
~ Increased tax credits for charitable donations and post-secondary students; higher tobacco taxes
~ A new in-year surplus allocation policy
~ Program spending reviews and tight in-year operating spending limits
Edmonton… The Alberta government is aggressively addressing growth pressures with significant investments in infrastructure and key services. Details of Alberta’s 14th consecutive balanced budget were unveiled
April 19, with Budget 2007: Managing Our Growth.”Given the province’s fiscal and economic strengths, we have a unique opportunity to improve the quality of life of Albertans,” said Premier Ed Stelmach. “There is a price attached to prosperity, and through
Budget 2007 we are taking the necessary steps to meet the priorities of Albertans during this period of phenomenal growth.”
Budget 2007 will provide $33 billion for programs and capital grants in 2007-08 to meet the needs of an economy that grew by 6.9 per cent last year and a population that increased by 100,000 people.
“The government recognizes that we can’t maintain the present pace of operating funding increases,” said Dr. Lyle Oberg, Minister of Finance. “Funding for operating expenses and capital must be sustainable and fiscally responsible, if Alberta is to maintain its future prosperity.”
Operating spending will increase 10 per cent overall, including increases for health care and advanced education. This will alleviate pressure on core service delivery and allow the Alberta government to move forward on important issues such as the environment, policing and children’s services.
The three-year Capital Plan will provide $18.2 billion for municipal infrastructure, schools, roads, health facilities, post-secondary institutions, housing, water infrastructure, and a new two-year grant program to upgrade and construct community facilities.
As part of the government’s priority to build a stronger Alberta, the Stelmach government is following through on a commitment to create a long-term funding arrangement with municipalities.
Funding for the first year of the Municipal Sustainability Initiative is $400 million, ramping up to $1.4 billion by 2010-11. Focusing primarily on core infrastructure, the funding agreement also includes support for water projects and $100 million for affordable housing.
Additional support for municipalities in 2007-08 includes $600 million for the Municipal Infrastructure Program and $900 million in other funding for public transit, policing, water-related projects, community services and other initiatives.
Revenue is not expected to repeat the extraordinary performance of last year, declining to about $35 billion in 2007-08. This is attributed to an expected decrease in energy revenue and more moderate economic growth over the coming year.
A forecast budget surplus of $2.2 billion will be used primarily for inflation-proofing of the Heritage Savings Trust Fund, an allocation to the Medical Research Endowment and to meet capital cash requirements.
In 2007-08, the Alberta government is taking steps to strengthen its fiscal management practices.
The Treasury Board ministry will play a key role in ensuring there is a disciplined approach to spending and tight limits on in-year increases to operating expenses. The ministry will review government programs to identify efficiencies and look for ways to better co-ordinate capital and operating planning, as well as mitigate capital cost escalation and explore options toward achieving cost certainty in capital construction.
Budget 2007 will also introduce a new in-year surplus allocation policy. If the projected surplus is higher than the current estimate of $2.2 billion, the government plans to allocate one-third of the additional cash available to savings and investments, while the remaining two-thirds will be allocated to capital. At least 50 per cent of the capital allocation will be used to support ongoing maintenance and rehabilitation of existing capital assets, while the rest will be invested in new infrastructure projects to accommodate and support growth.
Additional fiscal initiatives include the establishment of a Financial Investment and Planning Commission to examine the government’s long-term investment and savings strategies as well as the creation of the Alberta Investment Management Corporation to increase the opportunities for greater investment returns for the Heritage Fund, public sector pensions, endowments and other funds.
An independent panel of experts is also reviewing the royalty regime to ensure Albertans are receiving their fair share from energy development through royalties, taxes and fees. The panel is expected to present its final report by August 31. The government’s goal is to ensure the royalty framework strikes the right balance between providing Albertans with a fair return and maintaining an internationally competitive system that allows the Alberta economy to continue to prosper.
Income tax changes outlined in Budget 2007 will save Albertans nearly $200 million annually and save businesses about $22 million in 2007.
Alberta’s tax credit for total annual charitable donations over $200 will be increased to 21 per cent from 12.75 per cent. When combined with the federal charitable donations credit, Albertans will receive a 50 cent tax credit for every dollar donated over the $200 threshold.
To assist post-secondary students and their parents with living costs, the Education Tax Credit will be enhanced by 26 per cent. The monthly credit for full-time students rises to $600 from $475, while the credit for part-time students increases to $180 from $143 per month.
Other tax initiatives include the annual indexing of personal income taxes for inflation, the paralleling of some changes to personal and corporate income taxes announced in the federal budget, and an increase in the small business income threshold.
Effective midnight April 19, tobacco taxes will rise by 16 per cent in an effort to reduce smoking and promote a healthier lifestyle. The tax on a carton of cigarettes goes up by $5 to $37.
Budget 2007 supports Premier Ed Stelmach’s plan to manage growth pressures, as well as government’s priorities of governing with integrity and transparency, improving Albertans’ quality of life, building a stronger Alberta, and providing safe and secure communities.
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Backgrounder – Budget summary by ministry
~ Record $18.2 billion Capital Plan addresses Alberta’s growing infrastructure needs Press release
~ $12 billion health budget addresses growth pressures, sustainability Press release
~ Government boosts support to communities to help address growth pressures Press release
~ Key investments in education, training and workforce development aim to address Alberta’s labour force pressures Press release
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