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Alberta budget still on track for $3B deficit

EDMONTON — Alberta is getting squeezed by volatile oil prices and stiff competition and remains on track to rack up a budget deficit as high as $3 billion this year, Alberta Finance Minister Doug Horner said Wednesday.

“Right now the difference between the world price for a barrel of oil and what our producers can get for their bitumen is about $28. Multiply that by about 2.5 million barrels a day and the math adds up very quickly,” Horner told reporters while he delivered the second-quarter 2012-13 budget update.

Horner said Alberta is hampered by a lack of pipeline capacity to the U.S. and beyond.

“We have one customer (the U.S.) and one way to get our product to them. On the other hand, our customer has many different suppliers to choose from. This isn’t a good situation to be in and it’s costing us,” he said.

The forecast is for a deficit between $2.3 billion and $3 billion.

It matches the first-quarter update, but is a far cry from the government’s original deficit projection of $886 million.

The PCs have budgeted to raise $40.3 billion and spend $41 billion.

Horner said at the halfway point, $18.9 billion has come in with expenses at $20.3 billion.

Alberta will use the $5 billion in its sustainability fund piggy bank to cover any shortfall.

Horner reiterated the government will take on more debt to pay for schools, roads and other infrastructure to meet the demands of province expected to grow to five million people in the next two decades.

“That (growth) is essentially adding another city the size of Calgary to our province,” he said.

Oil currently sits at US$86 a barrel, but the government expects it will average out around US$92 a barrel, which is still well under the original forecast of US$99 a barrel.

Opposition critics say the government can’t be crying poor given that oil prices are still strong and the provincial economy is chugging along.

Wildrose Leader Danielle Smith called it a “train wreck” budget from a government that is now seeing $531 million going out the door every year in borrowing charges.

“We have a government that is overseeing one of the strongest economies in North America (but) can’t balance its budget,” said Smith.

“They’re talking about 2.5 per cent job growth, 4.5 per cent unemployment — the lowest in the country — retails sales up 9 per cent, 3.7 per cent GDP growth, 5 per cent increase in business investment.

“This is a government that has always relied on energy revenues to bail them out of their overspending, and this time it’s not working for them.”

Smith said the PCs allowed public sector wages and jobs to become bloated in the years of billion-dollar budget surpluses and now won’t address it.

“(There are) layers and layers and layers of senior executives and middle managers, all of them with a free rein on their expense accounts (and) all of them with massive compensation packages,” she said.

NDP Leader Brian Mason said the government is going down a path of spending and borrowing that can’t be sustained and the price will ultimately be paid by Albertans.

“We have forgone billions of dollars in revenues through unnecessary tax cuts for corporations and the wealthiest Albertans as well as continuing to have the lowest royalties in the world.

“The result is we’re going to see not only broken promises but program cuts coming forward in next spring’s budget, and I think Albertans better be prepared to see that.”

Liberal finance critic Kent Hehr said the Tories simply refuse to make hard choices.

“Be progressive: build schools, build roads, build hospitals, but you can’t keep doing it on fossil fuel resources and now debt,” said Hehr.

“They’re trying to be gutless wonders. It’s a term we use in hockey where guys would score goals in a 7-2 game. Where were they in the tough times when they had to make the tough call?”

Horner said the government is on track to find $500 million of in-year savings and will not contemplate new taxes or tax hikes.

 
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