Being that most Albertans are engrossed with the provincial election (OK, maybe 'engrossed' is a bit of an overstatement) it should be no surprise the Alberta government's third-quarter financial snapshot was released recently to little fanfare.

The recent announcement of yet another large surplus ($4.2-billion) likely didn't even raise an eyebrow, considering we haven't had a deficit budget since 1993-94.

If anything, it merely gave most Albertans a tacit assurance each party's laundry list of election promises could be fulfilled without too much worry.

Unfortunately, this not the case. What the third-quarter update did show is clouds on the fiscal horizon.

For starters, natural gas royalty revenues came in some $813 million lower than expected in the budget and $200 million lower than just three months earlier.

This is worrisome as natural gas royalties are the Alberta government's second-largest source of revenue. This is the third straight quarter of lower than expected natural gas royalties and will be a second-straight year of lower than expected royalties.

Fortunately, bitumen and crude oil royalties, as well as personal and corporate income taxes are higher than expected -- kicking in an extra $3.8 billion -- more than off-setting the loss in natural gas royalties.

Even Albertans with short memories should recall what happened in 2001 when natural gas revenues lagged. The Klein government, attempting to stay out of debt, reduced spending by $1.3-billion by eliminating community lottery boards, freezing hiring, cutting 1% out of every department, and deferring millions in infrastructure projects.

While Alberta is not yet in a position of having to make cuts, they may not be too far off; especially considering government reliance on non-renewable resource revenues to fund increased spending.

Total revenues in 2007-08 are slated to be $37.98 billion. Higher than expected, but lower than the $38.02 billion collected last year.

Still, the Alberta government receives the most revenue per capita in Canada. In fact, the B.C. government is only projected to collect 1.3% more revenue next year than Alberta is slated to collect this year. Yet, B.C. has 26% more citizens to provide services for. What this means is "out-of-control" spending in Alberta is catching up to our "we-have-no-control-over" revenues.

Our stagnating, but high revenues would be fine if spending was similarly stagnating, but Budget 2007 increased spending by 17% or $4.8 billion.

Revenues down by $33 million, program spending up by $4,847 million.

But, hey don't worry, we've got a $4.2-billion surplus, right?

Well, sort of.

It may be technically correct according to current accounting rules, but it's important to keep in mind the $4.2-billion surplus doesn't include the new $2.2-billion debt the government took over from the teachers, nor does it include some $2 billion of capital investment not included as an expense.

Add those in and our surplus vanishes.

Last fall, the Canadian Taxpayers Federation ran the numbers and projected that if nothing changes, Alberta will run a budget deficit in Budget 2009.

The PC Party, Alberta Liberals and NDP have all made expensive promises during this election.

No matter who is victorious, a tight financial position will await the winner.

This will likely mean one of two things: Taxes or debt will have to go up to fulfil spending promises made, or electoral promises will have to be forgotten to keep a balanced budget.