Legislative Assembly of Alberta The 27th Legislature First Session Standing Committee on Public Accounts Finance and Enterprise Wednesday, October 29, 2008 8:34 a.m. Transcript No. 27-1-12 Legislative Assembly of Alberta The 27th Legislature First Session Standing Committee on Public Accounts MacDonald, Hugh, Edmonton-Gold Bar (L), Chair Griffiths, Doug, Battle River-Wainwright (PC), Deputy Chair Benito, Carl, Edmonton-Mill Woods (PC) Bhardwaj, Naresh, Edmonton-Ellerslie (PC) Chase, Harry B., Calgary-Varsity (L) Dallas, Cal, Red Deer-South (PC) Denis, Jonathan, Calgary-Egmont (PC) Drysdale, Wayne, Grande Prairie-Wapiti (PC) Fawcett, Kyle, Calgary-North Hill (PC) Jacobs, Broyce, Cardston-Taber-Warner (PC) Johnson, Jeff, Athabasca-Redwater (PC) Kang, Darshan S., Calgary-McCall (L) Mason, Brian, Edmonton-Highlands-Norwood (NDP) Quest, Dave, Strathcona (PC) Sandhu, Peter, Edmonton-Manning (PC) Vandermeer, Tony, Edmonton-Beverly-Clareview (PC) Woo-Paw, Teresa, Calgary-Mackay (PC) Also in Attendance Pastoor, Bridget Brennan, Lethbridge-East (L) Department of Finance and Enterprise Participants Robert Bhatia Deputy Minister Dennis Gartner Assistant Deputy Minister, Financial Sector Regulation and Policy Bonnie Lovelace Senior Financial Officer and Executive Director, Strategic and Business Services Doug Lynkowski Controller, Treasury Board Rod Matheson Assistant Deputy Minister, Treasury and Risk Management Alberta Investment Management Corporation (AIMCo) Participant Jai Parihar Chief Investment Officer Auditor General’s Office Participants Merwan Saher Assistant Auditor General Wayne Morgan Principal Transcript produced by Alberta Hansard Standing Committee on Public Accounts Support Staff W.J. David McNeil Clerk Louise J. Kamuchik Clerk Assistant/Director of House Services Micheline S. Gravel Clerk of Journals/Table Research Robert H. Reynolds, QC Senior Parliamentary Counsel Shannon Dean Senior Parliamentary Counsel Corinne Dacyshyn Committee Clerk Erin Norton Committee Clerk Jody Rempel Committee Clerk Karen Sawchuk Committee Clerk Rhonda Sorensen Manager of Communications Services Melanie Friesacher Communications Consultant Tracey Sales Communications Consultant Philip Massolin Committee Research Co-ordinator Stephanie LeBlanc Legal Research Officer Diana Staley Research Officer Rachel Stein Research Officer Liz Sim Managing Editor of Alberta Hansard October 29, 2008 Public Accounts PA-183 8:34 a.m. Wednesday, October 29, 2008 This, of course, comes to item 4, our meeting today with the Title: Wednesday, October 29, 2008 PA officials from Alberta Finance and Enterprise. We will be dealing [Mr. MacDonald in the chair] with the reports of the Auditor General from October 2008; the annual report of the government of Alberta 2007-08, consolidated The Chair: I would like to now call the Standing Committee on financial statements of the government of Alberta annual report Public Accounts to order. I would like to welcome everyone in 2007-08 as well as Measuring Up, the business plan for 2007-08; attendance and quickly advise everyone that we do not need to touch and, of course, the annual reports for 2007-08. microphones. This is taken care of by the Hansard operator. Also, If we could now please hear a brief overview from the deputy please note that this meeting is recorded by Hansard and is also minister, we would be grateful. audiostreamed live on the Internet. If we could quickly go around the table and introduce ourselves, Mr. Bhatia: Thank you, Mr. Chairman. I’ll start with a few perhaps, starting with the vice-chair, please. highlights from the government annual report. Revenue for fiscal 2007-2008 was $38.2 billion. That was $388 million, or 1 per cent, Mr. Griffiths: Doug Griffiths, MLA for Battle River-Wainwright. lower than in 2006-07 but $2.8 billion higher than budgeted. Variations were caused mainly by resource revenue that was lower Dr. Massolin: Good morning. I’m Philip Massolin. I’m the than in 2006-07, but both resource revenue and income taxes were committee research co-ordinator, Legislative Assembly Office. higher than budgeted for 2007-08. This was the third year the financial results of the SUCH sector – Mr. Jacobs: Good morning. Broyce Jacobs, Cardston-Taber- school boards, universities, colleges, technical institutes, and Warner. regional health authorities – were included on a modified equity basis in the consolidated statements of the province. Equity in Mr. Dallas: Good morning, everyone. Cal Dallas, Red Deer-South. Crown-controlled SUCH-sector organizations increased revenues for fiscal plan purposes by $156 million and increased financial assets Mr. Chase: Harry Chase, Calgary-Varsity. Welcome to my by $3.5 billion. colleague Laurie Blakeman’s beautiful downtown Edmonton-Centre On the expense side total expenses were $35.7 billion in the year, constituency. 20.4 per cent higher than in the previous year and $2.5 billion higher than estimated. Increases were mainly due to increased spending in Ms Pastoor: Bridget Pastoor, Lethbridge-East. health and education as well as higher pension plan provisions. In the 2007-08 Measuring Up report the government lets Alber- Mr. Lynkowski: Doug Lynkowski, controller, Alberta Treasury tans know the outcomes of the government’s work for the past year. Board. It goes beyond reporting financial information by answering the questions: what did the government achieve with the dollars spent, Ms Lovelace: Bonnie Lovelace, senior financial officer, Alberta did the government actually do what it said it was going to do, and Finance and Enterprise. did the government progress toward achieving its goals? Turning to Alberta Finance, as it was for the vast bulk of 2007-08, Mr. Gartner: Dennis Gartner, assistant deputy minister, Alberta revenue for the fiscal year was $17.6 billion, which was $778 Finance and Enterprise. million, or 4.6 per cent, higher than in 2006-07 and $2.3 billion higher than budgeted. The main cause of the increase was due to higher personal and corporate income taxes. Total expenses were Mr. Bhatia: Robert Bhatia, deputy minister, Finance and Enterprise. $3.5 billion in 2007-08, $2.3 billion higher than in the prior year and $2.2 billion higher than estimated. The increase was caused by the Mr. Matheson: Rod Matheson, assistant deputy minister, Alberta assumption of the pre-1992 unfunded pension obligation of the Finance and Enterprise. teachers’ retirement fund. Net operating results for the ministry were a positive $14.1 billion. Mr. Parihar: Jai Parihar, chief investment officer, Alberta Invest- ment Management Corporation. 8:40 During 2007-08 $1.4 billion was added to the Alberta heritage Mr. Morgan: Wayne Morgan, office of the Auditor General. savings trust fund, $227 million was added to the scholarship fund, and $150 million was added to the medical research endowment Mr. Drysdale: MLA Wayne Drysdale, Grande Prairie-Wapiti. fund, a total of almost $1.8 billion dedicated to longer term savings. In the capital account a net $1.4 billion was transferred to the Ms Woo-Paw: Good morning. Teresa Woo-Paw, MLA, Calgary- account in 2007-08, increasing the balance in the account to 7 and Mackay. a half billion dollars at March 31, 2008. With the government agreeing to assume the teachers’ portion of Ms Rempel: Jody Rempel, committee clerk, Legislative Assembly their pre-1992 unfunded pension obligation, the overall pension Office. liability increased from $5.5 billion in 2006-07 to $7.8 billion in 2007-08. The Chair: Hugh MacDonald, Edmonton-Gold Bar. A few highlights from the fiscal year. During the year the May I please have approval of the agenda, item 2? Moved by Mr. government adopted a new in-year surplus allocation policy. If the Drysdale that the agenda for the October 29, 2008, meeting be surplus is higher than forecast in the budget, the additional funds approved as distributed. All in favour? None opposed. Thank you. available are allocated one-third to savings and two-thirds to capital Item 3, approval of our minutes. Moved by Mr. Dallas that the requirements. At least half of the capital allocation is used to minutes of the October 22, 2008, meeting of the Standing Commit- address capital maintenance and replacement requirements. To tee on Public Accounts be approved as distributed. All in favour? ensure that Albertans receive a fair share of the benefits of energy None opposed. Thank you very much. development in the province, government established a new royalty PA-184 Public Accounts October 29, 2008 framework during the year that offers stability and predictability for Mr. Parihar: No, Mr. Chairman. Robert has pretty well answered industry and investors. the question. The investment policies are determined by the minister On January 1, 2008, Alberta Investment Management Corporation of finance, and AIMCo implements those investment policies. The assumed management of more than $75 billion in public investment investments under administration are owned by the clients, so clients assets, including the Alberta heritage savings trust fund, other public provide the investment policy, and AIMCo implements those endowments, public-sector pension plans, and other funds. The new policies. structure improves organizational governance, increases flexibility, creates opportunities for greater investment returns, and follows the Mr. Chase: Thank you. Therefore, my second question: will best practices for top public-sector investment funds. AIMCo be releasing public reports on its investing activities and Albertans and Alberta businesses continue to