Flood costs offset budget gains

Alberta’s budget is doing much better than expected this year, but any gains will be offset by the costs from last summer’s catastrophic floods, Finance Minister Doug Horner said Tuesday.

EDMONTON — Alberta’s budget is doing much better than expected this year, but any gains will be offset by the costs from last summer’s catastrophic floods, Finance Minister Doug Horner said Tuesday.

“Alberta has turned a corner despite challenges and because of the new course we set out on Budget 2013,” Horner said as he revealed the mid-point update for the current fiscal year.

“The efforts in the first six months of this fiscal year have given us the fiscal and economic strength to manage after the flood.”

The year’s budget originally forecast a deficit of $451 million for day-to-day operational spending, but higher than expected oil royalties have morphed that number into a $1-billion surplus, Horner said.

But the government still expects to be about even at the end of the year due to the millions of dollars needed to help southern Alberta recover from the floods, he said.

About 100,000 people were displaced and more than 14,000 homes were damaged as rivers rose to incredibly high levels after a steady downpour that soaked the area in June.

The province expects it will have paid about $1.7 billion when recovery and flood mitigation efforts are completed years down the road. The federal government will chip in $2.8 billion under a federal disaster recovery program, but that number is expected to go higher.

Private insurers are expected to pay $1.7 billion.

This week, Horner asked the legislature to approve $764 million in additional funds this year to start paying flood bills. Additional requests are expected to be deferred to the spring.

About $351 million has already been spent on flood relief.

Opposition politicians suggested Horner’s rosy financial picture is a mirage because he isn’t including billions of dollars the government is borrowing to pay for new roads, schools, hospitals and other infrastructure.

The government plans to borrow a total of $17 billion by 2016.

The opposition said the government is on track to run a consolidated deficit of more than $2 billion when the borrowing figure is included.

“Same old story: record revenue, more debts and more deficits,” said Wildrose finance critic Rob Anderson.

“Minister Horner obviously talks about turning a corner. I hear the Edmonton Oilers have turned a corner as well,” added Anderson, who was referring to his favourite — and struggling — pro hockey team.

“The consolidated cash deficit is in the area of $3 billion to $4 billion.”

Derek Fildebrandt of the Canadian Taxpayers Federation pegged the deficit at $2.3 billion.

“That is an improvement over the last two to six months, no doubt, although it rests almost exclusively on higher than expected revenues,” said Fildebrandt.

NDP Leader Brian Mason said while the news is good now, it can reverse just as easily until the province stops relying so heavily on mercurial bitumen prices and begins to take in more oil royalties.

“The royalty roller-coaster and the bitumen basket are things that are seriously hampering the government’s ability to solve its financial problems in the long run,” said Mason.

Liberal critic Kent Hehr agreed: “We are in a system that is not stable, it’s not based in fact, and the government is running away from any responsibility to fix Alberta’s fiscal structure.”

Among the second-quarter highlights:

• Revenue was $20.3 billion, which is $1.4 billion higher than expected.

• Expenses were $19.3 billion, an increase due mainly to flood recovery.

• Overall, there was a $1.1-billion operational surplus after the first six months of the fiscal year.

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