EDMONTON — The budgets in oil-rich Alberta continue to hemorrhage buckets of red ink, but Finance Minister Ted Morton says some of the bleeding has been staunched.
Morton, delivering the final report card on the 2009-10 fiscal year, announced Thursday that the deficit will be $1 billion — a far cry from the $4.7 billion originally forecast.
“Revenues are up, we held the line on spending and our deficit is smaller. This is all good news, but it should not be seen as a licence to spend,” Morton said at the legislature.
He noted the government still expects to run a $4.7-billion deficit in the current fiscal year due to wildly fluctuating oil prices, an up-and-down Canadian dollar and natural gas prices that are expected to remain low.
“We’re hardly out of the woods,” he said. “We’re an export-based national economy. What happens elsewhere in the world affects us directly.”
Higher revenue from oilsands royalties and corporate income tax overcame collapsing natural gas prices to shrink what had been predicted would be a deep deficit hole.
It’s the first time oilsands money took the lead over natural gas revenue as the province’s biggest cash cow.
Morton said that will continue in the years to come because natural gas inventories are large and the United States continues producing shale gas.
“That’s the new reality. What had been the big horse in the stable is now a pony, and likely to stay a pony for awhile,” he said.
Revenue for fiscal 2009-10 was $35.7 billion, about $4 billion more than forecast. Expenses came in at $36.7 billion — $303 million more than expected because more money was needed to fight forest fires and stave off a pine beetle infestation.
Morton noted that the improved bottom line will mean less money will have to be drawn from the province’s Sustainability Fund, which stood at $15 billion as of April 1.
Meanwhile, the province’s nest egg, the Alberta Heritage Savings Trust Fund, earned just over $2 billion — three times more than originally forecast — due to strong investment returns in the global equity market.
The value of that fund sits at $14.4 billion. The extra $2 billion earned has been moved to general revenues to help pay down the deficit.
The province’s overall debt now sits at $1.1 billion.
NDP Leader Brian Mason labelled the Tories lucky, but not good.
“They have not placed the province on a stable footing. They are still overly dependent on resource revenue and its volatility,” he said.
Scott Hennig of the Canadian Taxpayers Federation agreed. He noted the corporate tax cash and $2 billion from the Heritage Fund may well be one-time benefits. The province needs to cut spending immediately, he suggested.
“Next year is going to be much uglier. Last year’s deficit was $900 million. This year’s deficit is a billion. We’re going in the wrong direction. Our deficits are going up, not down.”
Hugh MacDonald of the Opposition Alberta Liberals said the Sustainability Fund may not even be around much longer with an election looming within two years.
In past elections, said MacDonald, the Tories have used such surplus money to bribe voters with their own tax dollars.
“You’re a year, a year-and-a-half out from an election, cabinet ministers are elbowing each other out of the way to present a cheque to prospective voters,” said MacDonald.
The report noted that bitumen prices were stronger than expected in 2009-10 due to heavier oil demand from big-ticket customers such as the United States and reduced supply from overseas producers such as OPEC, said the report.
Resource revenue was $6.8 billion, about $865 million more than expected. Oil averaged US$70.71 per barrel in the last fiscal year, US$15.21 higher per barrel than predicted in the budget.
Natural gas prices went through the floor early in the fiscal year and never really bounced back. Prices averaged $3.58 per gigajoule, about a third less than what was expected.
Corporate income tax revenue was $4.8 billion, more than double the amount projected and due primarily to strong cash receipts from the oil and gas sector.
— Health spending came in at $13.2 billion. That’s $73 million more than expected, but included more money for physicians and to pay for part of the $80-million price tag to vaccinate Albertans against the H1N1 virus.
— Alberta’s economy shrunk by 5.1 per cent in 2009, mainly in the resource sector.
— Alberta’s population grew by 2.6 per cent, the most of any province and double the national rate to sit around three million.
— Retail sales fell 8.3 per cent.
— Housing starts spiralled down for the second consecutive year, by almost 32 per cent, to 20,000.
— The average number of drilling rigs fell 46 per cent while the value of Alberta manufacturing shipments dropped 21.6 per cent.