"We get $10 billion worth of resource revenue (a year), they (government officials) are blowing through our (multibillion-dollar) savings, and in addition to that they're taking on debt?" said Smith.
"The level of incompetence on the fiscal side is stunning.
"They're marching down the same path that so many jurisdictions around the world have marched down that has gotten them to the brink of insolvency."
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Smith was responding to weekend comments from Redford and Finance Minister Doug Horner on the state of the Alberta budget.
Redford promised during the February budget and in the April election campaign to balance the province's books by 2013-14.
But at the weekend Progressive Conservative party convention in Calgary, Redford and Horner said the budget will be balanced as promised — but only on the day-to-day operations side.
Horner said they will be looking to take on debt or enter into private-sector agreements to pay for big-ticket capital projects such as roads, schools, and hospitals that can't wait in a growing province.
They labelled it sound financial management akin to taking out a mortgage on a house, then budgeting to make the payments.
"If everything we do right now is funded fully with cash in the bank, then we are never going to build anything more in this province," Redford told reporters.
Smith said Redford does not have the mandate to take Alberta back into debt, and should take the issue to a referendum.
"If (the Tories) told Albertans 'We're going to buy things today and put the mortgage on our kids and our grandkids, I can assure you they would not have won the election," she said.
Smith said the decision also repudiates the work of former Tory premier Ralph Klein, who along with then treasurer Jim Dinning cut spending and parlayed Alberta's oil wealth into wiping out the $23-billion net debt.
"It's like Ralph Klein and Jim Dinning never existed for the PCs," said Smith. "Everyone was so proud of what Ralph Klein did for us going through the sacrifices of the 1990s to make us a debt-free province."
Horner told reporters on the weekend that Klein's $23-billion paydown was on the operating side, and he said Redford's government will honour that principle going forward.
"The debt that we repaid and celebrated was an operating debt that had been accumulated," said Horner. "It's like paying for your groceries with your Visa (card). We are not going to do that."
Smith said history suggests the line keeping one side of the ledger in the black and another in the red eventually becomes a grey zone.
"British Columbia went down this path of trying to separate out what's operating debt versus capital debt and some silly things can begin to happen," she said.
"You begin booking things like computers in as capital debt when we all know computers don't have much of a shelf life.
"What happens in the end is you have a province like British Columbia where they have over $40 billion in government debt."
Derek Fildebrandt of the Canadian Taxpayers Federation said the Tories have proven they can pay as they go with $38 billion in infrastructure spending in the past six years.
Fildebrandt agreed the government is now on a slippery slope, but said they believe they can spin their way out.
"They're counting on this being a complicated issue that Albertan's can't understand — capital expenses versus operational expenses," said Fildebrandt.
"But they're just changing the definition of a balanced budget to try and do it. I think most people are going to be able to see through that and see that it's a deceitful way of trying to keep an election promise."
In the spring budget Redford projected an $886-million deficit in the 2012-13 budget year on revenues of $40.3 billion and expenses of $41.1 billion.
The deficit projection ballooned to as much as $3 billion in the first-quarter update. The second-quarter update is to be delivered by Horner at the end of the month.
There are other expenses.
An all-party committee was told last week that the province also has a $10-billion pension liability and a $4-billion infrastructure maintenance deficit.
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