Albertans received some bad fiscal news in the form of the third quarter financial results last week.
Finance Minister Joe Ceci had to deliver the news that projected revenue for the 2015-16 fiscal year is now $660 million lower than originally estimated.
The revised outlook also estimates that Alberta's economy will contract by 1.1 per cent in real GDP this year, following a contraction in 2015, and energy investment is forecasted to decrease by 22 per cent.
But what grabbed headlines was Ceci's acknowledgement that the deficit could balloon by another $5 billion, bringing it up to $10.4 billion.
"I think the projected deficit now is huge," said St. Albert MLA Marie Renaud. She said she is worried about it, but said she is happy the NDP government is choosing to not cut essential services as a stopgap measure.
She said cutting more jobs in the face of the economy is likely not the answer.
Many of those who come to her office are looking for more supports or access to programs, she said, not cuts to services.
Spruce Grove-St. Albert MLA Trevor Horne said oil prices have put Alberta in "a bit of an interesting economic situation."
"The deficit itself I'm not as concerned about. Our debt to GDP ratio is still pretty strong," he said.
Horne's been hearing a lot from people who are concerned about job creation, he said. He also said people are nervous about the possibility of cutting government services, and said now is not the time to cut essential jobs like nurses or teachers.
Horne highlighted the government's plans to invest in infrastructure, as well as giving more capital to ATB and investing in more venture capital as positive actions.
Deficits are funny things
"Deficits are funny things," said Michael Roberts, an assistant professor at MacEwan University as well as the chair for the department of international business, marketing, strategy and law.
Roberts said debt for capital assets can be a reasonable kind of debt to take on, depending on the circumstances.
But the provincial budget introduced in October proposed borrowing to help cover operating costs.
"They're basically borrowing for groceries as opposed to borrowing for a house or a car," Roberts said. "I think in terms of these operational deficits, they're harmful because they just pile up."
There have been many examples of big deficits not ending well, he said.
"Do you want to be Ontario?" he asked. "They can't pay their bills, there's no chance, no thought they will balance the budget."
If there was 100 per cent certainty this was the only year the budget wouldn't be balanced, it'd be a different circumstance, he said. However, it's often hard to get out of debt once in as a government, because people have built up expectations of the services provided for their tax dollars, even if tax dollars haven't been covering the whole cost.
"Most spending by the government is structural," he said adding the taxes that governments raise fall behind the spending.
"That's what's wrong with it, it's that we're not paying our bills and it's not sustainable … structural deficits are simply by definition not sustainable," Roberts said.
