The Alberta government will continue to dip into its sustainability fund to cover a deficit now forecast at $5 billion, an increase of $257 million from budget 2010/11.
Finance Minister Ted Morton made the announcement during a second quarter update on Monday, during which he said low natural gas prices, a high Canadian dollar, a volatile stock market and low economic recovery in the United States have contributed to the province's deficit, which will climb from $4.7 billion to $5 billion.
Morton said the province would be back in the black by 2012/13.
“The past decade of booming economic growth and surging government revenues are past. Alberta is in a better position than most other provinces but difficult decisions do lie ahead,” Morton said.
“Economic uncertainty remains high around the world and, as an export economy, what happens elsewhere affects us.”
Revenue for 2010/11 is forecast at $34.1 billion, up $127 million from the budget. This is due to increased revenue from land lease sales ($1.4 billion), corporate income tax ($577 million) and federal transfers ($412 million).
However, that total is offset by lower personal income tax revenue ($1.1 billion), lower investment income ($216 million) and the increased cost of drilling stimulus initiative claims ($788 million).
Government expenses are forecast at $39.1 billion, an increase of $384 million from budget estimates. That figure includes $534 million for disaster and emergency assistance.
Capital grants are down $190 million while operating expense remains relatively flat compared to budget forecasts.
“Alberta is in a better position than other provinces to weather these uncertain times but it's not a position we can take for granted,” Morton said, adding that there would be “continued uncertainty and risk.”
Morton said he did not want a repeat of the 1980s and 1990s when the province's annual deficit was rolled into long-term debt.
“We've been there, we've done that and we're not going to do it again,” he said.
Richard Truscott, the Canadian Federation of Independent Business' Alberta Director said he was disappointed the government hadn't made more of an effort to trim its spending.
“Obviously there is a need to spend money on one-time contingencies like forest fires, floods and drought but there should be some budgeted reserves set aside within operating expenditures to pay for those things,” he said.
“The government likes to talk about the $1 billion of cost savings and efficiencies they were seeking but we continue to not see it show up on the bottom line,” he added.
“It's a little disappointing to see expenses rise with revenues every year. They're basically operating pretty close to the line and, in this case, we're billions in the red.”
Alberta's sustainability fund is expected to be $11 billion at year-end, $2.8 billion higher than the budget estimate but $266 million lower than first quarter.