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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer supports fiscal framework AUMA resolution

The City of Red Deer supported the City of Edmonton in its… Continue reading

Central zone down to 16 active COVID-19 cases

Alberta Health Services’ central zone is down to 16

Red Deer drum circle aims to ‘bring different cultures together’

Central Alberta Refugee Effort, Urban Aboriginal Voices Society hosted the event Friday

Students reassured pandemic’s academic impact will be taken into account

Some Grade 12 students concerned how pandemic will affect their post-secondary plans

Liberals vow wage-subsidy extension to 2021, revamp of EI system in throne speech

Canadian labour market was hammered by pandemic, when lockdowns in the spring led to a loss of 3 million jobs

A mind-boggling tale of idiocy

Some people have the IQ of a piece of second-hand furniture

Wilkinson aims to be B.C. premier after cabinet role, working as doctor and lawyer

The B.C. election is Wilkinson’s first as the Liberal party leader

First Nations police services look to throne speech pledge for higher, stable funding

‘I won’t be happy until I hear two words: royal assent’

No winning ticket for Friday night’s $50 million Lotto Max jackpot

Jackpot for the next draw will grow to approximately $55 million

Tiny airborne particles may pose a big coronavirus problem

NEW YORK — At a University of Maryland lab, people infected with… Continue reading

Scores arrested in protest against Belarus’ president

KYIV, Ukraine — Hundreds of women calling for the authoritarian president to… Continue reading

At UN, India vows to help produce virus vaccine for world

TANZANIA, Tanzania — Indian Prime Minister Narendra Modi pledged to help the… Continue reading

Shattenkirk scores in overtime, Tampa Bay beats Dallas 5-4 in Stanley Cup final

Shattenkirk scores in overtime, Tampa Bay beats Dallas 5-4 in Stanley Cup final

Most Read