More red ink in Alberta’s provincial budget


Alberta banks on oil rebound to balance the books

Supporters say the Alberta budget preserves frontline services, while critics say NDP spending is out of control.

The provincial government is not making any cuts and is predicting modest growth in the 2017 budget, while the debt continues to climb.

On Thursday afternoon the NDP government tabled its third provincial budget and predicted 2.6 per cent GDP growth this year combined with a $10.3 billion deficit, which includes a $500 million cushion for risk adjustment. The provincial debt this year will hit $45 billion and is predicted to clock in at $71 billion by 2020.

The unemployment rate isn’t expected to move much, with the projected rate to sit at 8 per cent by the end of the year. By 2019 the government expects that number to drop to 7.1 per cent

Finance Minister Joe Ceci said his government will continue its capital spending and will not cut funding to core public services, while still planning on gradually reducing the provincial debt.

St. Albert MLA Marie Renaud is proud of the budget and happy to see the government doesn’t plan on cutting any frontline services.

St. Albert-Spruce Grove MLA Trevor Horne said he is fine with the province accumulating fiscal debt as long as infrastructure needs are being met and the province delivers vital frontline services.

Renaud said she is grateful the government is committed to preserving frontline services and supporting Alberta families.

Along with continuing to fund frontline services, the government will to sink a record $9.2 billion into capital projects.

Both Renaud and Horne were excited to see Ray Gibbon Drive and a solution for a new St. Albert high school on a list of unfunded capital projects.

The MLAs said that despite the fact that the projects have yet to receive funding, their inclusion on the list of around 100 unfunded projects is good news for the city.

“There is a recognition that they are important and needed and they just need find the funding,” St. Albert city councillor Cathy Heron said.

Several capital projects were announced in the budget, including a new hospital in Edmonton, which will receive $400 million over four years. More projects announcements will roll out over the coming weeks. It is not known if any St. Albert projects will be on the list.

St. Albert Mayor Nolan Crouse said that the announcement of the new Edmonton hospital is good news for the city because it means construction and design jobs will be available for the residents of St. Albert.

To help put money back in the budget the government is forecasting revenue for the year to be $45 billion or 4.8 per cent higher than the 2016-2017 forecast, while operating expenses will clock in at $54.9 billion, or a 3.9 per cent increase from the last budget.

By 2019 the government anticipates a $7 billion deficit and unemployment sitting at 7 per cent. By 2023-2024 the government is hoping to return to balance.

Debt servicing costs will continue to climb and are estimated to hit $1.4 billion for the 2017-2018 year. By the 2019-2020 fiscal year debt servicing costs will balloon to just under $2.3 billion.

Barrhead-Morinville-Westlock MLA Glenn van Dijken said that he is extremely concerned with the government’s operational costs and spending priorities.

Right now the government is racking up a $10.3 billion deficit just to keep the lights on, and van Dijken is frustrated the NDP is not finding efficiencies in the budget.

Despite the rising debt, the government is seeing increased revenue. Resource revenue from bitumen royalties is predicted to more than double from the 2016 budget forecast, up to $ 2.5 billion. Total revenue is expected to hit $51.8 billion by 2019-2020, largely due to oil revenues climbing.

“It’s not about revenues, it’s about controlled expenses,” van Dijken said. “The issue is not as much our revenue as our bloated spending.”

Although van Dijken said while he does support capital spending he is concerned that there may not be the fiscal capacity to manage and maintain the new projects long term.

Along with the official opposition, the St. Albert Chamber of Commerce is also frustrated with the budget.

“This is not a business-friendly budget. The massive deficits this NDP government is racking up will inevitably mean an increase in taxes; the money to service the debt has to come from somewhere. This will mean greater costs for individuals and businesses,” said Brian Bachynski, Chair of the St. Albert Chamber of Commerce and publisher at the St. Albert Gazette.

The budget forecast is that the numbers won’t be in the black until 2023-2024. Horne said that balancing the budget will have a lot to do with what OPEC does but he is optimistic the government will balance the budget by their deadline.

The government anticipates bringing the deficit down to $7.2 billion by 2019-2020, which accounts for a $1 billion risk adjustment.

Right now the government has structured the budget around the price of oil sitting at $55 dollars per barrel for the year and eventually rising to $68 per barrel by 2019-2020. On Tuesday morning ATB announced oil had dropped to around $48 per barrel. Ceci said he isn’t worried about the temporary drop in oil price and is planning around long-term price projections.

Alberta is also banking on the construction of the Line 3 and Kinder Morgan pipelines to dig the province out of the red, and Ceci anticipates those projects to be completed on time by 2021.

After the announcement of last year’s budget, the province saw its credit rating get downgraded twice in several months. The reports cited a concern with Alberta’s drastic jump in borrowing with no clear path to repay the debts.

Wildrose MLA van Dijken said he is concerned that the province could get downgraded again after he said this budget showed no clear path to repayment.

The budget will go to a vote later this month and further capital projects will be announced in the coming weeks.


About Author

Jennifer Henderson

Jennifer Henderson joined the St. Albert Gazette in 2016. She writes about municipal, provincial and federal politics; court and crime; general news and features.