The forecast for Alberta’s deficit is lower than previously expected, and the province is on track to balance its budget by 2012-2013, the Alberta government said Thursday.

The province’s deficit for 2009-2010 is now forecast at $4.3 billion, a decrease of $390 million from the budget. The improvement is the result of the increased oil, oil sands, investment, and corporate income tax, revenue, along with $430 million of current cost savings, it said.

“While it is heartening to see some improvement in the province’s finances, we’re still forecasting a significant deficit, and so we will proceed with plans to take $2 billion in fiscal corrections to get back in the black by 2012-2013,” said Finance and Enterprise Minister, Iris Evans. “We can’t just cross our fingers and hope things will get better. We have to take action, and we are.”

The current fiscal forecast reflects the full $430 million in cost savings which the government committed to achieve to help address the fiscal imbalance. Ministries were asked to reduce operating expenses, while providing the least amount of impact on front-line services.

The government says that its plan for economic recovery will have the province back into a surplus position by 2012-2013 by trimming government spending; using short-term savings to protect key programs; continuing to invest in public infrastructure; and helping the province’s industries remain competitive to attract investment, jobs and create prosperity.

“Our plan for economic recovery is on track,” said Evans. “While there are some positive economic signals, it is also clear that Canada and Alberta are still not out of the woods yet.”

Revenue in 2009-2010 is now forecast to be $32.6 billion, almost $1 billion higher than forecast in the budget. Expenses are now expected to be $575 million higher than originally forecast, primarily due to increased funding for emergency and disaster assistance for agriculture, forest fire-fighting costs, combating mountain pine beetle infestations, capital grants, and higher caseloads in income support and health benefit programs.

At the same time, it said that the Alberta Heritage Savings Trust Fund earned $1.9 billion on a fair value basis over the first two quarters of 2009-2010, for a return of 13.6%, compared to a loss of 7.2% for the same period last year. “The Heritage Fund has continued to see some impressive results since the first quarter,” said Evans. “The markets are doing well, which benefits both the Heritage Fund and Albertans through the fund’s contributions to supporting priority programs.”

“I continue to be pleased by the performance of the Alberta Investment Management Corporation — their investment decisions have added to the value of the Heritage Fund above and beyond the market-based increase,” she added.

IE