Alberta’s 2016-17 deficit could top $10 billion, Ceci reveals
The steep and prolonged collapse of world oil prices has doubled Alberta’s deficit projection for next year to more than $10 billion, Finance Minister Joe Ceci announced Wednesday.
Ceci revealed the revised outlook during his third-quarter fiscal update, which showed the drastic drop in oil and gas revenues has made a massive dent in the province’s bottom line.
“This is the steepest and most prolonged slide in oil prices in recent history, dropping more than 70 per cent in the last year-and-ahalf,” Ceci told a legislature news conference.
“Projections for a quick recovery have proven wrong. There’s no minimizing the impact that low oil prices are having on people’s jobs, on our economy and on the government’s fiscal situation,” he said.
“This is a once-in-a-generation challenge and we are now faced with stark choices.”
Ceci said the deficit in the upcoming spring budget — which he revealed for the first time will be tabled in early April — will climb significantly.
The finance minister avoided specifically saying the deficit could top $10 billion in 2016-17, instead pinpointing the amount he expects it to grow.
“It’s potentially $5 billion more than we projected,” he said.
“It’s a hell of a lot of money,” he added later.
The province had originally hoped to chip away at the deficit by next year, projecting it would hit $5.4 billion in 2016-17 and $4.4 billion in 2017-18.
Instead, Ceci’s financial update showed the projected 2015-16 deficit has increased by $197 million to $6.3 billion and will continue to climb in the following years.
The NDP government’s pledge to balance the books by the next election in 2019 is no longer possible, Ceci said.
“The pathway to balance will take longer to achieve,” he said.
He said the shortfall will be partially offset by the province’s contingency account — which is pegged at $3.9 billion — along with the province’s plan to begin borrowing in 2016 to pay for operational spending.
Ceci said he has no plans to introduce new taxes next year and reiterated again the government won’t bring in a sales tax.
“Now is not the time to draw more taxes out of the economy.”
Since October, West Texas Intermediate oil prices have fallen 30 per cent. The decline has led to a 20 per cent drop in revenues, Ceci said.
Resource revenue in 2015-16 is down $294 million from the October budget projection and personal income taxes slid a further $762 million, but the province offset some of the decline with a $251-million stabilization grant from Ottawa, the third quarter update showed.
Reflecting the worsening outlook, the government has lowered its forecast oil price from US$50 to US$45. To date, oil has averaged $46.50. Ministry officials say it averaged just over $42 a barrel in the third quarter and is expected to average $33 until the end of March.
Wildrose critic Prasad Panda slammed the province for not do- ing more to cut spending and for “creating chaos” in the economy by increasing personal income and corporate taxes, which the official Opposition opposed.
“Today’s update paints a bleak picture for our economy,” he said.
Cutting expenses would show investors that Alberta is “ready to take its spending problems seriously and would protect Albertans from future tax increases down the line,” he added.
Progressive Conservative interim leader Ric McIver echoed that criticism, saying the government’s policies are destabilizing the economy.
“This government has no other plan than to continue racking up debt that will rest squarely on the shoulders of our children and grandchildren,” he said in a written statement.
The Alberta government still plans to spend $6.9 billion on capital projects in 2015-16, borrowing most of that money — nearly $6 billion — and pushing its liabilities for capital projects to nearly $18 billion.
The province is expecting another $700 million federal grant from the New Building Canada Fund but that money is expected to show up in next year’s infrastructure budget.
Spending decreased by $463 million as the NDP suspended Access to the Future grants to universities and benefited from reduced pension costs, deferred spending on capital projects and lower than expected emergency assistance costs, according to the update.
Alberta Health Services helped out by paying $190 million in operating expenses out of its $270-million reserve, finance officials said.
While personal income tax is down significantly, corporate tax is up $227 million from budget to nearly $5 billion.
Debt servicing costs are up $1 million to $779 million.