More than 30 years after it was created, Alberta's multibillion-dollar Heritage Savings Trust Fund has become a stagnant pool of money that has failed to achieve one of its primary goals - diversifying the province's boom-bust economy.
Former Tory premier Peter Lougheed, whose government created the fund in 1976, is sorely disappointed and has renewed his push to breathe new life into the fund.
Mr. Lougheed, who has a Harvard MBA, was shocked when he heard that the Heritage Fund had lost $3-billion in the markets, reducing its value to $14-billion.
"That number is distressing to me because when I left government in 1985, the fund was of a similar value," he told The Canadian Press in an interview.
Mr. Lougheed's government designed the Heritage Fund so that 20 per cent could be used for capital projects to help diversify the province's roller-coaster economy, which still relies primarily on the energy sector.
In the early years, the fund was used to kick-start the petrochemical industry and to create a medical research foundation.
But these are among the only diversification successes.
"It was a clear, specific and I think highly successful diversification of our economy that occurred," Mr. Lougheed said.
The Heritage Fund grew rapidly in the 1970s as Alberta boomed. The province put 30 per cent of revenues from oil and natural gas into the pot.
But the fund was capped shortly before Mr. Lougheed retired as oil prices plummeted and the province starting sinking into debt.
The next Tory administration, led by Don Getty, started draining the fund's revenues, which were being generated by billions of dollars worth of investments. That continued after Ralph Klein became premier in 1992. The fund's value wasn't even keeping up with inflation.
Veteran Alberta economist Greg Flanagan said the Heritage Fund is now worth only a fraction of what it could have been if successive Tory governments had continued making contributions.
"It has shrunk tremendously when you weigh its value in constant dollars," said Mr. Flanagan. "A 2009 value of $14-billion, that's probably $7-billion or less in those dollar terms."
Mr. Getty made several high-risk investments with government funds. Many proved to be huge failures.
When Mr. Klein became premier in 1992, his administration chose not to build the fund in any significant way, even when the boom times returned to Alberta.
"[Mr. Klein]wasn't interested, for a variety of reasons, in sustaining the Heritage Savings Trust Fund," said Mr. Lougheed. "He set up other funds. So it never really fully met the objective of diversification.
"The fund was allowed to stay at a pretty static position for a number of years."
Mr. Klein responded to an interview request with his usual candour, stating in an e-mail that "as much I would like to reply [to Mr. Lougheed's remarks,]I will keep my mouth shut. It's not my nature to criticize past premiers or the present one."
Mr. Lougheed is hoping Alberta's present Tory government, led by Premier Ed Stelmach, will return to the original policy of diverting 30 per cent of revenues from oil and natural gas into the fund and using a portion of the money to fund diversification projects.