EDMONTON — Alberta’s financial update shows global turmoil hasn’t upset its overall budget projections, but critics say the figures released in the statement show how vulnerable the province remains to what’s happening elsewhere in the world.
The first-quarter fiscal update, released Wednesday, shows Alberta’s deficit projection remains at $4.76 billion, about $7 million higher than initially forecast.
“There are things we can’t control,” said Finance Minister Ted Morton. “What we can control is expenditures, and that’s what we’ve been doing.”
Updated forecasts suggest the province will collect nearly $900 million less in personal income taxes than it did last year.
But at the same time, projections for the amount of corporate income tax have increased by almost the same amount.
Tax and royalty breaks to the oilpatch intended to stimulate drilling will cost the government nearly $700 million more than originally budgeted, largely because of a higher percentage of activity from smaller companies, which receive a greater benefit. At the same time, the higher Canadian dollar suggests Alberta will collect $214 million less than it had forecast, wiping out gains from higher activity levels and oil prices.
But those losses should be more than offset by other energy revenue, the update says.
Oilsands revenue should come in more than $230 million more than originally budgeted, largely because of lower costs for the industry. Natural gas prices 50 cents per gigajoule lower than projected should also be made up for by lower costs, leading to an $82 million royalty increase over the year.
And land sales to companies looking for hydrocarbon resources are booming. New projections suggest they’ll be more than $1.2 billion greater than budget estimates.
All balanced out, it means overall energy revenues will be $613 million higher than anticipated.
Morton said that shows the government’s royalty regime and incentive packages are working.
“The dramatic increase in land sales indicates Alberta is a competitive place to explore for oil and gas,” he said.
Morton acknowledged that dramatic swings in the global economy make it tough to budget for the export-dependent province.
“The global economy has seen unprecedented volatility in the last 18 months,” he said. “(Projecting) isn’t a science, but it’s not throwing darts at the board, either.”
The Heritage Fund has also been hit by turbulent stock markets, losing $282 million in value. Revenue from the $14-billion fund — whose overall worth hasn’t changed in years despite Tory promises to “inflation-proof” it — is now estimated to be $366 million less than forecast.
Liberal critic Hugh MacDonald agreed the province faces very difficult times.
But he warned the government not to panic, saying the province’s $11-billion sustainability fund — a rainy-day account fed by resource revenues originally proposed by the Liberals — should see Alberta through without major cuts.
“We can work our way through these difficult times without cutting key government services,” he said.
New Democrat leader Brian Mason said the province could balance the books tomorrow if it ditched its flat income tax and began charging high-income earners more.
“The flat tax has been a gold mine for high-income Albertans, but it’s given the middle class the shaft,” he said, claiming a progressive income tax could bring in another $5 billion.
Wildrose Alliance leader Danielle Smith repeated her concerns that Alberta spends too much to begin with. She said blaming the global economy is an “excuse,” and pointed out that Alberta’s economy has been growing — if modestly — for about a year.
“Today’s first-quarter update confirms we have a spending problem,” she said.
All four politicians scoffed at the idea of using a sales tax to reduce the province’s dependence on non-renewable resource revenue. But Morton hinted the tax may be under consideration by a government-appointed economic advisory panel.
“In the medium to long term, (we’re) looking at all the option we have for smoothing revenue volatility,” he said.
He added: “Albertans are rather happy and even proud of the fact that there isn’t a sales tax.”