EDMONTON — Alberta could be debt-free by next spring - just in time to celebrate its centennial - if oil and natural gas prices stay high, Finance Minister Pat Nelson said as she tabled her budget Wednesday.

While Nelson said that's her dream, she is only planning in her budget for a $1-billion debt payment to bring the accumulated debt down to $2.7 billion.

She said industry analysts are calling for oil and gas prices to drop, but if they remain sky-high over the next 12 months, it could clear the slate just in time for the next election for Alberta to be the only debt-free province in Canada.

"If, and I say if, resource revenues are considerably higher than our forecast, my vote, and the premier's vote, will be to seize the opportunity and hand Albertans the best gift we could provide - the gift of a debt-free province," Nelson said.

Premier Ralph Klein mused last week that paying off the debt in 2005 would be a nice legacy and hinted that the next election campaign could be his last.

The debt hovered at $23 billion just a decade ago.

The province is forecasting a modest surplus of $303 million, but it has rolled out a string of consecutive billion-dollar surpluses since the mid-'90s.

While Nelson would only say for certain that Alberta will be within striking distance of eliminating the debt, non-renewable resource prices are much higher today than what the province has forecast over the next fiscal year.

The Tories are predicting oil prices will average $26 US a barrel and gas prices to average $4.20 per mcf over the next year. The Nymex oil price was hovering at $37.45 a barrel Wednesday while the Nymex gas price hit $5.53.

'Historical norm'

Eliminating Alberta's debt would return the province to the historical norm, said Brad Reid, chairman of the University of Alberta's Economics department.

"People got used to the fact there's been these huge debts, but that's not been the case," he said.
Almost all Alberta debt was racked up in the decade between 1982 and 1992, when oil prices crashed, said Reid.

Even federally, debt wasn't a regular feature of the public books until the 1970s. "Debt was inconsequential," Reid said.

Now, all Canadian provinces and most U.S. states carry at least some debt.

The last time a province declared itself debt-free was in the late 1960s.

Then-British Columbia premier W.A.C. Bennett marked the occasion by loading up a barge full of government debentures, floating it on Lake Okanagan and attempting to ignite it with a flaming arrow.

He missed. A Mountie had to ignite the blaze with his Zippo lighter.

The Alberta spending document came a day after federal Finance Minister Ralph Goodale tabled his budget.

Ottawa has earmarked $1.9 billion against its $510 billion debt and over the next decade plans to reduce the debt-to-GDP ratio to 25 per cent from its current 42 per cent.

While debt elimination was the big news in Nelson's speech, health, education and capital spending were the big items in the actual budget documents, along with modest tax cuts for corporations and small businesses.

The Tories hiked spending by 6.1 per cent to $22.6 billion, with projected revenues of just under $23 billion.

Mindful that a provincial election is looming, the Tories boosted health spending by more than eight per cent and education spending by nearly six per cent while pumping 400 million new dollars this year into infrastructure.

The new money brings annual provincial education spending to $5.3 billion.

The new health dollars pump up Alberta's health budget to $8 billion - 38 per cent of the total provincial budget - and give Klein new ammunition to argue that the health-care system is unsustainable and radical changes are needed.

The province will also hike funding for municipal policing by 50 per cent and free 20 small communities from having to pay for police services.

A 'cynical budget'

The Opposition Liberals said the budget failed to address concerns of ordinary Albertans by continuing to under fund education.

"It's a cynical budget for a cynical and tired government," said Liberal finance critic Kevin Taft. He noted the province allocated a 22 per cent increase in the horse racing subsidy compared with the 5.7 per cent for education.

"It's a budget for government, accountants and their friends but not for ordinary Albertans."

Brian Mason of the Opposition New Democrats agreed that rank and file Albertans were treated poorly.

He noted that while corporate income taxes were cut, user fees were going up. And he said while the Tories want to reduce student debt, the money they're giving to post-secondary institutions won't be enough to stop tuition hikes.

The budget appeared to continue the Alberta government's tradition of grossly underestimating its non-renewable resource revenues.

Budget 2004-05 forecasts resource revenues at $4.8 billion, which would be nearly a 40 per cent drop from the revenues expected last year. While final figures from 2003-04 still aren't in, the third-quarter report pegged resource revenue at $7.4 billion and the final tally is expected to be much higher.

Nelson told reporters she hoped her figures were "soft," but said she didn't apologize for the conservative forecast.

The Canadian Energy Research Institute has pegged the average price of oil at $31 US a barrel this calendar year and an average of nine national forecasters was $28.27 US.

But the biggest difference between Alberta's projections and that of forecasters is in natural gas prices, where analysts picked an average price nearly a dollar above the provincial forecast.

Each 10-cent increase in the price of gas above the forecast adds $100 million to Alberta's coffers while each dollar increase in oil adds $65 million.

If the analysts are right on gas prices alone, Alberta stands to reap a billion dollar bonanza.