Alberta’s deficit balloons to a record $7 billion

EDMONTON — Alberta’s energy boom gone bust has left the province with projections of a record $7-billion deficit and if natural gas prices continue to fall, there could be even more red ink by the end of the fiscal year.

EDMONTON — Alberta’s energy boom gone bust has left the province with projections of a record $7-billion deficit and if natural gas prices continue to fall, there could be even more red ink by the end of the fiscal year.

Finance Minister Iris Evans has ordered provincial bureaucrats to find $430 million in program savings, but deeper cuts are coming as the government scrambles to trim $2 billion from the budget by next year.

“Quite frankly, our earnings took a real kick in the head,” Evans told a news conference Wednesday. “We are heavily dependent on our oil and gas revenues.”

“Global economic turmoil is deeper and more sustained and natural gas prices are lower than originally forecast and the result is a higher deficit than we predicted.”

The new deficit number included in Alberta’s first-quarter update is $2 billion more than the original budget forecast. But the latest forecast is based on a prediction that natural gas prices will nearly double to $4 per gigajoule for the remainder of the fiscal year.

Some market analysts are predicting exactly the opposite for natural gas prices in the coming months because of large inventories of gas in storage and a weaker North American economy.

Evans was coy about whether the deficit could get even worse given these dour predictions. When asked if continued weak gas prices could increase the deficit, the minister said flatly: “Not in this forecast.”

Scott Hennig of the Canadian Taxpayers Federation said with financial reports this week predicting gas prices falling below $1 per gigajoule, Alberta’s deficit projections are overly optimistic.

“I have no confidence that this (deficit) number is going to stay where it is,” said Hennig. “I think it could reach $8 billion or even $8.5 billion.”

Jack Mintz, former president of the C.D. Howe Institute, also said the deficit could end up being worse if natural gas prices fall lower. But he also said the province may be overly optimistic in its projections for tax revenue.

“I would expect that corporate taxes will fall much more than is reflected in the statement,” said Mintz.

“I think that there’s a potential negative shock on some of the other taxes as well.”

Premier Ed Stelmach announced Tuesday that Alberta’s financial pain would likely continue for at least two years after the recession ends. But Stelmach said the deficits over the next few years will be offset with $17 billion in emergency savings, so no tax increases are planned and he’s reluctant to cut jobs.

But Evans offered contradictory statements on whether a series of deficits over the next few years could end up draining the entire $17 billion Sustainability Fund.

“We will not allow that the happen,” she said in a prepared statement at the start of the news conference. But under a barrage of media questions, the finance minister later recanted.

“We might take it down to zero, but that’s the worst-case scenario.”

Evans had to revise a prediction she made earlier in the year that Alberta would weather the current economic downturn with only 15,000 job losses. The new figure is 22,000.

The minister also issued a more gloomy economic forecast of negative 2.5 per cent growth for the year, due mainly to weaker housing starts and lower than expected consumer spending.

Later in the day, Alberta’s health superboard announced it will pursue a further three per cent budget cut to deal with its $1.1-billion deficit.

Stephen Duckett, CEO of Alberta Health Services, said it is looking at voluntary retirements, as well as reducing red tape and finding cost savings from providers, to lop off a further $350-million in annualized savings.

That’s on top of the $650 million already saved through such initiatives as streamlining the purchasing of knee and hip replacements.

Duckett said they don’t expect to balance the budget for another three to four years, but Evans insisted that this additional public debt should remain separate from the government’s red ink.

Total revenue for the year is now forecast at $29.6 billion, while expenses are pegged at $36.4 billion.

Just Posted

Scares and chills await at haunted house in Red Deer

Zed Haunted House helps raise money for Boys and Girls Club of Red Deer District

PHOTO: Renewable Energy Fair at Red Deer College

The Renewable Energy Fair and Workshops event was held at Red Deer… Continue reading

PHOTOS: Red Deer College Queens host third annual Pink in the Rink game

Queens raised $12,035 for the Central Alberta Cancer Centre.

PHOTOS: The Mustard Seed CEO speaks at Seeds of Hope Gala in Red Deer

The first-ever Seeds of Hope Gala was held at the Red Deer… Continue reading

Person airlifted to hospital after collision near Innisfail

One person was airlifted to hospital after a serious collision west of… Continue reading

WATCH: Make-A-Wish grants Star Wars loving teen’s wish

The Make-A-Wish Foundation granted Anakin Suerink’s wish in Red Deer Saturday afternoon

Turkey to reveal details of probe into Khashoggi’s killing

ISTANBUL — In a sign of growing pressure on Saudi Arabia, Turkey… Continue reading

Utah truck driver is jailed without bond after crash kills 6

HEBER, Utah — A man suspected of driving under the influence remained… Continue reading

A ragged, growing army of migrants resumes march toward US

TAPACHULA, Mexico — A ragged army of Honduran migrants streamed through southern… Continue reading

Postal workers to begin strikes in 4 Canadian cities Monday if deal not reached

OTTAWA — The union representing 50,000 Canada Post employees says it will… Continue reading

Migrant caravan swells to 5,000, resumes advance toward US

CIUDAD HIDALGO, Mexico — Despite Mexican efforts to stop them at the… Continue reading

“I don’t feel real”: Mental stress mounting after Michael

PANAMA CITY, Fla. — Amy Cross has a hard time explaining the… Continue reading

Toronto residents set to vote Monday on the next four years of civic leaders

Toronto’s municipal election campaign, marked by unprecedented provincial interference, ends Monday when… Continue reading

Former PQ minister Lise Payette remembered as role model for female politicians

MONTREAL — Members from across Quebec’s political spectrum gathered at a downtown… Continue reading

Most Read