Record deficit

Alberta, once the high-flying petro-powered express of Canada’s economy, jumped the tracks and crashed Tuesday when Finance Minister Iris Evans tabled a budget with a $4.7-billion deficit.

Iris Evans

EDMONTON — Alberta, once the high-flying petro-powered express of Canada’s economy, jumped the tracks and crashed Tuesday when Finance Minister Iris Evans tabled a budget with a $4.7-billion deficit.

After years of multibillion-dollar surpluses, the predicted shortfall in 2009-10 is the largest in the province’s 103-year history.

“The choice is simple,” Alberta Premier Ed Stelmach said.

“We either dip into our emergency savings or, on the other hand, lay off thousands of public service (workers), whether it be nurses, teachers, doctors, anybody that provides service to Albertans.

“We’re not going to do that.”

Immediate measures include tax increases on tobacco and alcohol, as well as an increase in the education portion of property taxes.

And the pain may not be over.

If revenues don’t rebound, the province announced it will have to raise as much as $2.2 billion more this year to ameliorate future deficits, either by cutting spending, increasing taxes, or both.

Another $215 million in savings must be found by streamlining departmental budgets.

“For Alberta this is a good news story,” Evans told reporters before delivering the budget.

“In terms of the global recession, we’re still riding the uncertainty, but we’re in the best boat possible.”

Collapsing energy prices have gutted Alberta’s economy and turned 15 years of surpluses into two consecutive red-ink budgets.

Evans had originally forecast a $1.6-billion surplus for the current fiscal year, but 2008-09 will finish with a $1.4-billion deficit.

She said tax increases would not be the first choice in a province that has long prided itself on having no provincial sales tax.

“We have no plan to increase taxes. We have the lowest-taxed regime (in Canada) and we mean to keep it that way.”

But she said she would never say never.

“If we’re in the situation where we need $2 billion, there will be no stone unturned.”

Opposition Liberal Leader David Swann said the government didn’t husband its resources when times were good and now must pay the price.

“Fiscal discipline is not known in this administration,” said Swann.

“They’ve continued to spend beyond our means with budget increases of 10 per cent per year without any clear plan or vision for a more sustainable, healthy Alberta.”

Brian Mason, leader of the opposition New Democrats, said waiting to find the $2 billion may be more about politics than accounting.

“It may well be that they’re trying to roll the bad news out a piece at a time because now they’re producing a budget that’s not quite a budget.

“It says, ’Here’s where we’re going to spend on these things, but we haven’t quite figured out this piece yet, so we’ve just left it all really vague. Frankly that’s not good enough.”

Danielle Smith of the Canadian Federation of Independent Business said if the global economy doesn’t turn around, Alberta will be in trouble.

“I think people’s jaws are going to drop when they see the size of the deficits we’re going to have, not only this year but also going forward for the next four years.

“They (the government) stand to actually blow through their entire savings within three to four years’ time.”

David Hennig of the Canadian Taxpayers Federation said he’s glad to see Alberta is working to tame future deficits by going after the $2 billion now.

“Otherwise we’re going to have debts we’re paying interest on. They should have been making these cuts prior to this budget.”

Total spending in 2009-10 is pegged at $36.4 billion, just under last year’s record total of $37.1 billion.

Health care continues to be the biggest expense at $12.6 billion — up more than four per cent from last year. It’s a 40 per cent slice of Alberta’s overall operating spending pie.

Education spending is going up three per cent to $5.4 billion — about 17 per cent of the total.

Total revenues are expected to be $35.6 billion, an expected drop of 11 per cent compared with 2008-09.

The shortfalls will be paid off using money from the government’s $7-billion Sustainability Fund.

Evans said the province’s legislation forbidding deficits will be rewritten to make it more “flexible.”

Under the new rules, the government will be allowed to run a deficit as long as the amount owing doesn’t exceed money in the Sustainability Fund. The government still won’t be allowed to borrow to pay for operating expenses.

The budget is based on a prediction that oil prices will be US55.50 this year. Each $1 change in the price has a $143-million impact on Alberta’s bottom line.

Some highlights from the 2009-10 Alberta budget:

• $4.7-billion deficit, the largest in Alberta history.

• $215 million in spending cuts to be identified this year.

• If revenues don’t rebound, government must find $2.2 billion more by cutting spending, increasing taxes, or both.

• Immediate tax increases for alcohol ($1.30 on a dozen beers, 75 cents for wine, $2.89 for most spirits) and tobacco ($3 a carton).

• Higher education property taxes (varies by community).

• Municipal project funding falls by 25 per cent or $100 million.

• $200 per year for chiropractic services to be eliminated.

• $7.2 billion in capital spending (double the national average).

• 3.7 per cent or $1.1 billion increase in program spending.

• Resource revenue down by half or $6.4 billion.

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