Alberta budget shows $1.1B surplus, but billions borrowed for infrastructure
EDMONTON — Alberta is back in the black when it comes to day-to-day spending, but the good times are being underwritten with billions of dollars in debt.
The province will run a consolidated surplus for the first time in six years of $1.1 billion in the 2014-15 fiscal year, Finance Minister Doug Horner said Thursday.
There will be no new taxes and no tax increases, and Alberta will retain its status as Canada’s only province without a sales tax.
There is money for 40 more Mounties, 50 news schools and 2,000 new spaces for post-secondary students.
And there is cash to complete twinning of the overburdened and dangerous highway to the oilsands hub of Fort McMurray.
Horner said the province is also earmarking $1.1 billion over the next three years to help Calgary and southern Alberta recover from last year’s extensive flooding.
But Alberta is projected to rack up $21 billion in debt by 2017, most of it for roads, schools and hospitals for the tens of thousands of newcomers arriving each year.
Horner said it doesn’t make sense to dip into Alberta’s savings accounts — pegged to reach $26 billion this year — when they’re making an 11 per cent return on investment while borrowing costs are less than four per cent.
“This is the right financial plan for the current situation, with interest rates at 50-year lows,” Horner told reporters before delivering the budget speech in the legislature.
“If we don’t do this, then you stymie the growth in your economy.”
The province has been running deficit budgets since the global economy tanked in 2008, taking oil prices with it. It avoided long-term debt for a time by draining $17 billion from its short-term savings account.
Horner is crediting this year’s surplus to rebounding oil and gas prices and to a lower Canadian dollar, which helps Alberta’s export-based economy.
Non-renewable resource revenue is forecast at $9.2 billion, almost seven per cent higher than last year due to higher oil prices and a lower Canadian dollar.
The budget estimates the benchmark West Texas Intermediate price for oil will average US$95.22 a barrel this fiscal year and the Canadian dollar will be average US$0.91. Oil was trading at US$101.56 Thursday afternoon and a dollar was worth about US$0.91.
Total revenue is forecast at $44.4 billion and total operational expenses at $38.5 billion. Spending is up by 3.7 per cent over last year.
The rainy-day savings contingency fund is earning money again and is expected to reach its maximum $5 billion in 2015. When the long-term Heritage Savings Trust Fund is included, total government savings are expected to be $26 billion.
Total tax revenue is forecast to be $21.1 billion, five per cent higher than last year due to population and economic growth. Alberta’s population recently surpassed four million people.
On the spending side, $1 billion more will go to health, education, post-secondary education and social programs.
Cities are to get $150 million more over the next three years to pay for roads and recreation centres as they see fit. They are currently getting $846 million a year.
The education budget is going up to $6.7 billion to accommodate an extra 18,000 students.
The health department remains the big spender. It has been allocated $18.3 billion this year, about 45 per cent of the total operational budget.
Horner’s opponents, particularly the Opposition Wildrose party, say the government’s number crunching is jiggery-pokery and the next generation is being saddled with crushing and unnecessary debt.
They say debt should be factored into the day-to-day bottom line, which would balloon what the government claims are small surpluses into billion-dollar deficits.
Horner has argued that the government is borrowing against hard assets that have resale value, much like a mortgage, and therefore should not be included in day-to-day expenses.
He said debilitating debt comes when a government borrows to pay for operations, which he said is not happening.