Alberta on track for major deficit
Drop in royalty revenues could put province $3B in the red
By: By Megan Sarrazin
| Posted: Saturday, Sep 01, 2012 06:00 am
Government ministries are reviewing their spending as Alberta prepares for another major deficit this year that could reach as high as $3 billion, says Finance Minister Doug Horner.
The first-quarter fiscal update presented Thursday painted a troublesome financial future for the province after energy prices hovered well below the forecasted rate.
From April 1 to June 30 revenue was down nearly $400 million with expenses climbing $5 million higher than budgeted, which Horner attributed to disaster assistance.
“If the first-quarter trend continues … Alberta could see a deficit of between $2.3 and $3 billion,” he said. “We are tightening our belts. We will cap overall operating spending to budget allocations and we have asked departments to operate lower than budget.”
At the end of the first quarter, the province sits with a $588-million deficit, which is up from the projected deficit of $194 million.
Decreased revenue from oil and bitumen royalties as well as Crown land lease sales are being blamed for the financial turmoil.
Non-renewable resource revenue alone rang in $888 million less than the budgeted $2.8 billion, with much of the shortfall resulting from decreased bitumen-royalty revenue, which was down $550 million.
This decrease in revenue was buffered slightly by increases in income tax revenue at $101 million over target, and premiums, fees and licences, with $296 million more than anticipated.
The projected oil revenue was based on $99 per barrel, which has now been adjusted to $93 after the cost per barrel dipped to roughly $77 at the end of June.
Wildrose finance critic Rob Anderson said the projection for high oil prices was unrealistic given the uncertainty in the European and American market and said the government is spending like “teenagers with no limit on their credit card.”
“(Alison Redford is) playing a game of Russian roulette with Alberta’s finances and it’s beginning to look like there may be a bullet in the chamber this time,” he said.
Kerry Towle, Wildrose seniors’ critic, said the budget was a “pipe dream” and cautioned the situation is going to get worse before it gets better.
Despite the volatile energy market, Horner said he does not believe the province will reach a $3-billion deficit at year’s end.
“My mandate is to have a balanced budget in 2013-14 and that’s my target; that’s where I’m still headed,” he said.
To come in on target, Horner is urging ministers to re-evaluate their capital projects.
“We will be reviewing every government program and service to ensure that every single penny goes towards delivering programs and services that produce demonstrated results for Albertans,” he said.
There is no indication what programs or projects will be cut in efforts to come in on budget and Horner said government will continue to invest in health care, education and emergency situations as required.
There will be no additional funds allocated to public sector negotiations, like those currently underway with teachers and doctors.
“I think there should be a message in this for them in the sense that we are going to hold the link on our spending,” he said. “We are tightening our belts; we would expect all others to do the same.”
Despite the increased deficit, Horner remained confident, particularly in the province’s employment rate, housing starts and retail sales.