Buoyed by a red-hot economy fuelled by oil and gas revenue, Alberta’s new Progressive Conservative government led by Premier Ed Stelmach has boosted spending in its 2007-08 budget to a record $33 billion.

That’s a hefty increase of 10.7% over the previous year, and the extra cash is earmarked to fund a massive catch-up in repairs and upgrades to the province’s deteriorating infrastructure.

Alberta boasts the fastest-growing provincial economy in the land. “This is the price of prosperity,” says Alberta’s finance minister, Lyle Oberg. “There comes a time when we have to catch up on building.”

The April 19 budget was the province’s 14th consecutive balance budget, and it projects a surplus of $2.2 billion on revenue of $35.3 billion. That includes $18.2 billion over the next three years to pay for needed infrastructure projects — a 37% increase over last year’s capital plan.

Some people say the spending jump is necessary to make up for the years when previous premier Ralph Klein postponed basic infrastructure projects in order to pay off Alberta’s debt.

“We’re cleaning up Ralph’s mess,” says NDP leader Brian Mason, adding that there was too little in the budget for low-income Albertans, whom, he says, are being left behind in the economic boom.

Under the spending program, municipalities will receive $4.3 billion over three years for road and bridge improvements, affordable housing and public transportation upgrades.

A further $1.3 billion is slated for school projects and $3 billion is for health facilities. Oberg also had to set aside $1.3 billion to cover price increases on infrastructure projects that have already been announced.

And as Oberg presented his budget, he outlined just how robust Alberta’s expansion has been in the past year.

The population has increased by about 100,000, or 3%, in the past year, which is three times the national average. Also, approximately 86,000 new jobs were added as the rapidly growing economy expanded by a sizzling 6.9%.

“I would challenge anyone to say that we would have had 100,000 new people move into Alberta last year, and I would hesitate to ask anyone in the province of Alberta, in the country of Canada, to predict we would have had a 6.9% GDP growth last year,” the finance minister noted.

But Liberal leader Kevin Taft isn’t buying the government’s argument that the pace of Alberta’s growth was well beyond expectations.

He describes the record spending as “a huge amount of money” and says that the budget is completely unsustainable because there is a large reliance on oil and gas revenue.

“My deepest concern is that it feels totally unfocused,” he says. “These guys continue to spend our oil and gas money almost as fast as it comes out of the ground.”

And Alberta Alliance leader Paul Hinman says the budget is short-focused. “This is short-term gain but we’re going to have long-term pain,” he warns.

The Alberta business sector widely condemned the budget as well, saying it is disappointed that meaningful reductions in both business and personal taxes did not materialize.

“There is nothing in this budget for business,” says Alberta Chamber of Commerce CEO Ken Kobly. “I don’t think their spending levels are anywhere near sustainable. This is the price of a lack of vision.”

Adds Danielle Smith of the Canadian Federation of Inde-pendent Business: “The priorities of this government are completely out of whack and this kind of spending is completely irresponsible.”

Critics are also concerned that in 2007-08, the Stelmach government plans to put less than $300 million into the Heritage Savings Trust Fund, the government’s long-term rainy day cache that currently is valued at $16.3 billion. However, if the projected $2.2-billion surplus increases, a portion of that money will be placed into the fund.

The root of much of the worry is a slowdown in the resources sector, with a resulting slowdown in the flow of resource revenue into provincial coffers.

According to the provincial budget papers, that trouble may already be close at hand.

The Alberta government says it’s expecting oil and gas revenue to drop by up to 33% over the next three years — primarily because of production changes, flat energy prices and falling mineral rights sales.

Oil and gas revenue is forecast to total $7.8 billion in fiscal 2009-10, compared with the record year of $14.3 billion in 2005-06. Revenue in 2007-08 is forecast to be $10.3 billion.

@page_break@The budget documents also say that Alberta’s oil and gas production, which generates about two-thirds of provincial resource income, is declining at an average annual rate of 4.3%.

Even though this budget is short on tax cuts, there are a few winners — including Alberta’s teachers, who will receive a $25-million break on pension-liability contributions to address a long-term underfunding problem that now stands at $4.3 billion.

Personal tax credits also will increase. The basic personal amount an Albertan can earn before paying taxes will rise to $15,435. As well, tax credits for annual charitable donations of more than $200 will be substantially increased.

But others, such as smokers, are losers.

The budget hikes tobacco tax levies by 16%, sending the taxes on a carton of cigarettes up by $5 to $37 — making Alberta smokers the most heavily taxed of all Canadian smokers. IE