In 1975, fresh off the heels of winning his second majority government, Alberta premier Peter Lougheed created the Alberta Heritage Savings Trust fund to put aside revenues from the province's vast resource wealth for a "rainy day" — which happens quite often in Alberta's boom-and-bust economy.

Today, we have weathered the worst recession since the 1930s and the European and American economies are dangling perilously at the edge of another. In other words: Welcome to that rainy day. Unfortunately, the Progressive Conservatives have neglected the fund and, after more than three decades, it contains just $15.2-billion — not much more than when Mr. Lougheed stepped down as premier 25 years ago.

Compare that to Alaska's similar fund, created the same year as Alberta's, which now contains more than $38-billion and pays an annual dividend to all state residents. In 2008, Alaskans received more than $3,000 per person. This year they will get slightly more than $1,000 — just for living in an oil-soaked arctic wasteland.

Norway's fund — which was created in 1990 and didn't start receiving money until 1996 — had approximately $329-billion in assets as of 2007. That money will be used to fund pensions for generations to come.

There's no question the Heritage Fund could have been a valuable asset for Albertans, had it been managed properly. Mr. Lougheed estimates that if the government had continued putting in 30% of resource revenues, as Mr. Lougheed was doing, it would be worth somewhere in the range of $100-billion today.

Alberta's new Finance Min-ister, Ron Liepert, has signalled the fund will no longer be allowed to languish in obscurity under the administration of newly minted Premier Alison Redford. But where's the money going to come from?

The province is projecting a budget deficit of $1.3-billion in the 2011-12 fiscal year. To prevent the province from going back into debt, that money is being drawn from the Sustainability Fund.

Set up by former premier Ralph Klein's government to coexist with the Heritage Fund, but to be used for short-term financing, the Sustainability Fund has been drawn down from a high of $17-billion in 2010, to an estimated $9.7-billion by year's end.

This can be blamed almost entirely on rampant overspending in recent years. According to the Canadian Taxpayers Federation, the province could have continued to run surpluses throughout the recent downturn, if it had limited spending increases to the rate of inflation.

But large increases during the later Klein years and throughout Ed Stelmach's administration, combined with Mr. Stelmach's disastrous economic policies, which drove investment out of the province, left Alberta with the highest per capita program spending in the country, and a deficit that is rapidly depleting its "rainy day" fund.

To make matters worse, Ms. Redford — who by all accounts is more progressive than conservative -- intends to drain the Sustainability Fund even further by ramping-up spending on health care and education, which already account for more than half of the provincial budget.

The Heritage Fund could still be a tremendous asset for Albertans if it were used as a means to store wealth generated from its non-renewable resources. But this cannot be done by raising oil royalties — which we know from experience will cause oil companies to look for new homes in Saskatchewan — or by topping up the fund when the government doesn't have enough money to fulfill its current obligations.

What's needed is for a truly fiscally conservative government to get Alberta's books in order. Once spending is cut and the deficit eliminated, yet again, the province could start adding to the Heritage Fund, so the benefits could be enjoyed by all Albertans.

National Post