Alberta’s rosy budget predictions dashed by global economic crisis

EDMONTON — Alberta’s hope for a better bottom line this year has been shattered by global economic turmoil.

EDMONTON — Alberta’s hope for a better bottom line this year has been shattered by global economic turmoil.

The province says in second-quarter financial numbers released Monday that it expects to finish the 2011-12 fiscal year next spring with a $3.1-billion deficit — close to what it had forecast in the budget.

“It shows our government’s challenge to balancing competing priorities,” said Treasury Board president and deputy premier Doug Horner. “We’re not immune to the turmoil outside our borders.”

The revised numbers are a big shift from three months ago, when officials predicted oil leases and strong oil prices meant the deficit would be almost $2 billion less than the $3.4 billion predicted last spring.

Lloyd Snelgrove, finance minister at the time, even said a balanced budget was possible.

But the province has since taken a hit, mainly on its foreign investments and lower oil prices, due to an economic slowdown and the crisis in Greece and Italy.

Horner and Finance Minister Ron Liepert said the goal is still to balance the budget by 2013-14, as promised by Premier Alison Redford, without sharp budget cuts that occurred under former premier Ralph Klein in the early 1990s.

Both mentioned that recent roundtable discussions with selected citizens indicated the province should look at new “revenue streams,” including a return to health-care premiums.

Those premiums, worth as much as $1 billion to government coffers, were abandoned under former premier Ed Stelmach in 2009.

Opposition critics said Liepert and Horner are laying the groundwork to bring the fees back, but Horner said their return isn’t a specific target, just a point of discussion.

“We’re not taking anything off the table except a sales tax — and the reality is that’s what Albertans have told us.”

NDP Leader Brian Mason said a return to health premiums would cost a family $1,000 a year and hammer middle and low-income earners.

One way or the other, the writing is on the wall for Alberta’s neediest, he suggested. “If you’re going to balance (the budget) by cutting, you’re going to have to balance it in the area where the government spends the vast majority of its money, and that’s in health and education.”

The resource-rich province, heavily dependent on foreign markets, has been running multibillion-dollar deficits since the global economic meltdown in 2008, but has also increased spending year over year to deal with a growing population now pegged at 3.7 million.

The update now forecasts revenue for the year at $36.8 billion, which is $1.2 billion more from the budget.

Among the revenue producers, oil continues to lead the way. Non-renewable resource income is forecast to bring in $10.1 billion, almost $2 billion higher than originally budgeted, due mainly to record sales of oil leases.

Investment income has also taken a big hit, however. It is now expected to bring in $1.4 billion. That’s $491 million less than forecast.

And spending continues to rise. It’s now expected to be $39.9 billion, which is $860 million more than originally budgeted for.

Wildrose party critic Rob Anderson said the government is running a deficit because it can’t manage its money.

“Clearly no one wants ’90s-style, deep, five per cent, across-the-board cuts, but what they are looking for is common-sense austerity.

“They don’t want $350-million MLA offices built. They don’t want cabinet to increase their salaries (and) they don’t want more empty hospitals because we don’t have nurses to staff (them).”

Liberal critic Hugh MacDonald said Liepert and Horner are bracing Albertans for bad news that will come after the next general election, which is expected in the spring.

“The ’deficit twins’ are indicating we should lower our expectations,” said MacDonald.

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