REPORT TO TAXPAYERS

Budget 2013 delivers the responsible change Albertans expect. It builds Alberta by investing in families and communities, builds our savings by ensuring government lives within its means, and builds new markets for Alberta’s resources, so that Albertans get the fairest price for our resources.

#BuildingAlberta

A MESSAGE FROM PREMIER ALISON REDFORDBudget 2013 strikes a balance between delivering on our commitments to build Alberta, while responding to rapidly falling oil and gas revenues by ensuring government lives within its means.

There is no doubt this year’s Alberta budget was a tough one. In the face of the Bitumen Bubble, some of the decisions our team had to make – like holding our spending to zero – were particularly difficult and not always popular. But we made them because they were the right thing to do to get Alberta’s finances back on track and on a more stable foundation for the future.

This report gives you the facts about our budget and outlines your government’s long-term plan to keep building Alberta. After all, the decisions we make today will set our province up for a stronger tomorrow.

Despite a $6.2 billion hit to our revenues this year because of the Bitumen Bubble – where Albertans are not getting the price we should for our resources – I’m proud that we were able to continue to deliver on the priorities Alberta’s families told us are most important.

Budget 2013 builds Alberta by investing in families, including the new roads, schools and health facilities we need. It makes sure we live within our means, by challenging every dollar the government spends and making sure every program continues to deliver real results for people. And it includes strategies to ensure all our resources, especially oil and gas, get to new markets at a much fairer price.

The budget puts these priorities into action with an operational plan, a fully funded capital plan, and for the first time in 25 years, a focused plan to save a portion of our resource revenues in the Alberta Heritage Savings Trust Fund.

Importantly, Budget 2013 keeps our commitment of no new taxes or tax increases – maintaining Alberta’s low-tax advantage.

Alberta is expanding quickly, with a young population that is expected to grow by 100,000 people this year alone. We are building for the future, which includes an expected million new arrivals calling Alberta home – the equivalent of adding another Edmonton or Calgary over the next 10–20 years.

Quite simply, we can’t afford to stop building. Albertans have told us you want new schools to keep class sizes down and accommodate Alberta’s booming student population, new health facilities so families can access the health professionals they need, new roads to get you safely where you need to go, and to keep our economy moving.

This budget is a prudent fiscal plan that reflects the province’s priorities for the future while addressing what matters most today.

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Alison Redford, Premier @Premier_Redford

BUDGET 2013 AT A GLANCE

Budget 2013 is:

Building AlbertaInvesting in families and communities

Living Within Our MeansChallenging every dollar government spends

Expanding MarketsGetting the highest dollar possible for Alberta’s resources

OPERATIONAL PLAN •Resource revenue is $6.2 billion lower than the 2012 budget’s estimate for 2013–2014, due to the bitumen bubble.

Operational revenue$37.6 billion

Total operational expenses$38 billion

•Operating expense of $36.4 billion is a 0% increase from last year – well below the expected population plus inflation rate of 4.3%.

SAVINGS PLAN •Alberta is committed to save in both good times and in bad times.

•Total savings to grow to more than $24 billion in three years.

•Contingency Account replaces Sustainability Fund, and focuses on short-term fiscal stabilization.

CAPITAL PLAN •Our fully funded capital plan will see $15 billion invested into infrastructure projects over the next three years, including $5.2 billion this year.

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Albertans told us they want to continue to strengthen our families and communities by investing in the things that help Albertans make a life – not just a living.Budget 2013:• invests$17billioninhealthcare,a$500millionincrease from last year, including:

Ȇ improved access to primary health care through a $262 million investment in Primary Care Networks, Family Care Clinics, and addiction and mental health services;

Ȇ a new PharmaCare program to provide prescription drug coverage for all Albertans;

Ȇ lower prescription costs that ensure Albertans pay the lowest price in Canada for prescription drugs; and

Ȇ $358 million for the Alberta Seniors Benefit program.• provides $5.2 billion to keep building modern health

facilities, quality schools, safe highways and other important infrastructure, including the accelerated twinning of Highway 63. Nearly $500 million over three years is budgeted for post-secondary capital projects.

• directs $500 million towards 50 new schools and 70 school modernizations.

• increases funding for programs that support vulnerable Albertans, including AISH, Persons with Developmental Disabilities, homelessness programs and child intervention programs.

• maintains funding for the Municipal Sustainability Initiative (MSI) at nearly $900 million this fiscal year, allowing municipalities to continue to meet local infrastructure priorities.

INDEPTHImproving the primary health care systemAll Albertans deserve a home in the health care system – a place where they have access to the health professionals they need, when and where they need them. As part of our commitment to primary health care, and to creating a new ‘front door’ to the health system, Alberta will open family care clinics across our province.Family care clinics complement the options already available to Albertans, including Primary Care Networks (PCNs), emergency care and the traditional family physician practices. The clinics will offer same-day appointments and direct access to the most appropriate health care team member.

KEY ACCOMPLISHMENTS• Created40PrimaryCareNetworksacrossAlberta that involve more than 2,900 physicians and more than 600 other health care providers who work together to provide care to over 2.9 million Albertans. • Launched three pilot Family Care Clinics (FCCs) in

April 2012 in Edmonton, Calgary, and Slave Lake. Since then, data from the three sites show: Ȇ approximately 4,000 previously unattached patients

are now attached to a FCC; Ȇ 10% of visits are unscheduled same-day

appointments and 15% of visits are in the evening, showing that urgent primary health care is being provided when people need it most; and

Ȇ emergency department visits are down by 20% in Slave Lake alone.

As part of the Chinook Primary Care Network (PCN), the Taber Clinic’s team-based approach to primary care has proven incredibly successful. “We really aspire to the idea of patients having a home in the system where they are known and where they have a trusting relationship where they can feel comfortable in addressing their health issues,” explains Dr. Rob Wedel, the Physician Lead of the clinic’s multi-disciplinary health care team. In addition to ensuring patients have a home in the system, the primary health care approach also allows the clinic to address the unique needs of the community. “While there are needs that are common in each community, the way we can organize around chronic disease management is how we will begin to make headway in providing the care our communities need most.”

Taber clinic helps patients take control of their health

Dr. Rob Wedel Physician Lead at the Taber Clinic

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Building AlbertaInvesting in families and communities

Responsible change demands we look carefully at how we spend and save today to secure our financial future. Budget 2013:• holdsthelineonspendingwitha0%increasefrom last year’s operating expense – well below the expected population plus inflation rate of 4.3%.• acceleratestheresults-basedbudgetingprocess,which challenges every dollar government spends by reviewing 800 government programs and services.• leadsbyexample:an8%MLApaycut;athree-year management salary freeze, which will save taxpayers $54 million; and reducing the number of public sector managers by 10% over three years.• createsafocusedplantoputmoneybackintothe Heritage Fund for the first time in 25 years.• ensuresAlbertansandAlbertabusinessescontinueto pay the least taxes in the country – with the lowest fuel tax among provinces, no payroll tax, no capital tax and no provincial sales tax.

INDEPTHClear rules for savings, spending, and borrowingLast year we asked Albertans how they want to see their tax dollars and resource revenue managed. We listened and developed a new fiscal framework that enhances rules for savings, spending, and borrowing.

The new savings plan means our province saves for future generations in both good times and in bad. It will also help Alberta be less reliant on natural resource revenues. Income from the Alberta Heritage Savings Trust Fund will be saved in increasing portions, eventually retaining 100% of its net income in three years.In addition, beginning in 2014, a portion of non-renewable resource revenue will be set aside as savings every year and put into either the Heritage Fund or other savings. It is expected that within three years the province’s savings will grow to more than $24 billion. The renewed fiscal framework requires government to have a balanced operational budget and limits in-year spending increases.Albertans told government they supported borrowing to pay for infrastructure when it makes financial sense, much like taking out a mortgage on a home. Instead of paying all the costs up-front or delaying the schools, roads and health facilities Alberta’s growing population needs, we will borrow responsibly to get things done. This fiscal framework sets limits on borrowing, and prohibits borrowing to pay for operational programs or services.

KEY ACCOMPLISHMENTS• IntroducedalegislatedsavingsplanthatmeansAlberta’s major savings accounts will grow to over $24 billion within three years.• Ensuredthatneededinfrastructurecanbebuiltby borrowing under the right conditions, and within set limits.• Reachedlandmarkagreementswithdoctorsandteachers that include salary freezes for the first three years and will provide long-term stability in health care and education.* • ImplementedCanada’stoughestexpensepolicyand disclosure of expense claims and receipts.

“We are ecstatic to see the province adopt the Alberta Chambers of Commerce policy on saving for the future. This is an ideal time to do that,” explains Ken Kobly with the Alberta Chambers. The Alberta Chambers has also long supported the need to strategically invest in capital projects and supports the provincial plan to leverage its solid credit rating to borrow at today’s low interest rates in order to proactively build infrastructure to accommodate Alberta’s growth. “We are particularly pleased to see that there were no cuts to the level of capital funding. And Budget 2013’s control over operating spending and lack of tax increases provide important stability and predictability for Alberta’s business community.”

Savings plan pleases the Alberta Chambers of Commerce

Ken Kobly President and CEO of Alberta Chambers of Commerce

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Living Within Our MeansChallenging every dollar government spends

*Subject to ratification by physicians, and by teachers and school boards.

Small potatoes have proven to be a big success for Edmonton’s Little Potato Company. Now 15 years old with 100 employees, it sells in excess of 40 million pounds of potatoes a year to retailers across Canada and into the United States. “And they’re all small potatoes,” notes Angela Santiago, co-founder and CEO. Today, the company grows and harvests across Canada and the U.S. to meet the growing year-round demand, and can be found on the shelves of retailers throughout Canada and in major U.S. markets such as New York, Boston, Los Angeles, Phoenix, Denver, New Jersey, Philadelphia, Minneapolis and Chicago. “People are often surprised that we’re based here in Edmonton, but I think it makes sense that we’re from Alberta. Alberta has a lot of entrepreneurs and when you’re surrounded by success you see that it is possible.”

Little Potato Company grows international market

Angela Santiago Co-founder and CEO, Little Potato Company

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Getting Alberta’s resources into new world markets at fair, competitive prices will help secure our economic future. Budget 2013:• leadsthedevelopmentofaCanadianEnergyStrategy to address market access and other barriers to growth for Canada’s energy sector.• addsanadditional$5milliontostrengthenAlberta’s presence and grow and diversify markets in Asia, the U.S. and Europe.• earmarks$204milliontosupporteconomic development, innovation and technology commercialization to enhance Alberta’s global competitiveness.• boostsenvironmentalmonitoringoftheoilsands and continues to build a provincial environmental monitoring system that is accessible, transparent and under scientific oversight by an arm’s-length agency.• advocatesforexpandedmarketaccessforAlberta’s oil through envoys to Washington D.C. and Ottawa. Premier Alison Redford has taken four missions to Washington D.C. to tell Alberta’s story directly to those who will make critical decisions about market access.

INDEPTHBetter access means higher prices for Alberta resourcesDeveloping and growing new markets in other parts of the world for our oil and gas, as well as for our agriculture and forestry products, will result in higher international

prices for our exported goods and services. This will create more jobs and increased revenues to support the programs, services and infrastructure that Albertans want.Alberta must address the barriers that keep us from reaching new markets. Some barriers are physical, such as a lack of infrastructure to get our products to market, while others have to do with misconceptions about our products. Alberta is working to open the doors to markets all over the world by: advocating for better transportation infrastructure for our products; building relationships in the fast-growing markets of Asia; and enacting tougher rules to ensure that resource development is responsible and sustainable.

KEY ACCOMPLISHMENTS• LaunchedtheAsiaAdvisoryCouncilaspartofalarger strategy to grow and strengthen relations with the crucial Asian market; a region that’s the future of the world economy. • IncreasedAlberta’sagri-foodexportstocountriesoutside North America (excluding U.S. and Mexico) by 15% to $5.6 billion in 2012, up from $4.9 billion in 2011. Exports to China and Japan accounted for more than one-half of these exports.• PassedtheResponsible Energy Development Act to create one single, efficient regulator for oil, gas, oil sands and coal development in Alberta that will begin operating in June. • ApprovedtheLowerAthabascaRegionalPlan,a comprehensive land-use plan for the oil sands region that sets out strict triggers and limits through environmental frameworks, and sets aside a significant amount of protected land.

#BuildingAlberta

Building MarketsGetting the highest dollar possible for Alberta’s resources

•TheGovernmentofAlbertaforecaststhepriceofoil based on industry’s estimates.

•Theaverageofallprivateforecastsis$94.28U.S.$/bbl for West Texas Intermediate in 2013. The Government ofAlbertaisusingaprojectionof$94.05U.S.$/bblfor the calendar year.

• Alberta’sbitumenhasbeensellingforalargerand more substantial discount to North American and global benchmark oil prices.

•This‘bitumenbubble’hashadasevereimpacton Alberta’s revenue outlook, with a $6.2 billion drop in 2013–14 resource revenue from the Budget 2012 estimate, and even larger declines in the next several years.

BUILDING A RESPONSIBLE FUTUREBudget 2013 reflects our commitment to making the kinds of responsible change our province needs to be ready for the future. Investing in families and communities, living within our means and creating new markets for our resources today will help us shape the kind of sustainable, secure future all Albertans deserve.

ALBERTA’S STRONG ECONOMY • Economicgrowthisexpectedtobe2.9%inthe2013–14 fiscal year, a sustainable and healthy rate of growth for a developed economy like Alberta’s.• Albertaattractednewresidents,with68,000more people arriving in 2013 than leaving. Total population growth will be close to 100,000 people.• Alberta’spopulationwillgrowtomorethanfivemillion people in less than 20 years.

• Albertaisprojectedtohaveoneofthelowest unemployment rates in the country – 4.5% in 2013.• Aftertwoyearsofrapidgrowth,jobgainsshould moderate to 1.9% in 2013.• Albertaisestimatedtoproduceover2.1millionbarrels per day of raw bitumen in 2013–14.• Astronghouseholdsectorhashelpedoffsetslower gains in the business sector. 3.7% growth in real consumer spending is expected to be a key driver of Alberta’s economy going forward.• Averageweeklyearningsareexpectedtogoup3.5% in 2013, and 32,600 new housing starts will contribute to growth.

CHALLENGES• Asasmall,export-basedeconomy,Albertaissusceptible to global risks, such as pipeline constraints, Eurozone economic troubles, and economic uncertainty in the U.S.

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Energy and Economic Assumptions 2012 Budget*

2013 Budget*

WTIOil(U.S.$/bbl) 99.25 92.50WCS@Hardisty(Cdn$/bbl) 83.28 68.21Differential(WCS/WTIinCdn$) 17% 27%Natural Gas (Cdn$GJ) 3.00 3.07ExchangeRate(U.S.cent/Cdn$) 98.6 99.0*

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