ALBERTA KEEPS BORROWING AS ECONOMY TRENDS UP

PROVINCE’S RECESSION OVER, BUT BORROWING BINGE CONTINUES

• Alberta’s long recession appears to have ended, but the provincial government will continue to borrow billions of dollars to cover expenses this year and next despite increasing revenues and calls to reduce the deficit.

The province released its third quarter fiscal update Thursday, which showed 18,000 jobs had been added in the province since employment bottomed out in July of last year. The majority of those jobs, 12,000 positions, were in the oilfield, where the government expects drilling activity to continue to recover.

“The evidence shows that the storm clouds are starting to recede with a little more s unshine peeking through,” Alberta Finance Minister Joe Ceci said of the province’s downturn. He said the government held its budget shortfall to $ 10.8 billion, unchanged from the government’s last forecast in November, though it is still higher than the $10.4 billion gap originally forecast in the 2016-2017 budget released in April.

“We remain committed to gradually decreasing the deficit over time,” Ceci said.

Opposition party and nongovernmental critics both blasted Ceci’s NDP government for not paring back the deficit during this update despite recording $ 1.5 billion more in revenues than budgeted. The province now forecasts revenues of $ 42.9 billion, as a result of improved oil and gas revenues.

“For quite some t i me now, we’ve heard the fi - nance minister saying, ‘ It’s a revenue problem’,” said Paige MacPherson, Alberta director of the Canadian Taxpayers Federation. “Here they have found this cash and chosen to i ncrease spending instead of chipping away at that deficit.”

The budget update also showed the government was no l onger i n compliance with its own Fiscal Planning and Transparency Act, which the NDP made law in 2015, thanks to increased expenses and a $ 1.1 billion planned payout to coal- fired power producers.

The act was meant to limit unplanned hikes in operating expenses to 1 per cent of the budget, but the government now projects operating expenses will be roughly five per cent higher than planned. In total, the province now expects to spend $ 53.7 billion this fiscal year, which is up $ 2.6 billion from the budget.

In the past, multiple ratings agencies cut Alberta’s credit rating as a result of what Moody’s Investors Services called an “unconstrained debt burden.”

“I think a full review of the Q3 document by the credit ratings agency or others will tell the story that this is a one- time thing,” Ceci said of breaching the spending restraints imposed by the act. “We’re not going to get under the one per cent rule by drastically cutting back programs and services,” he said.

To fund those services next year, the budget update showed the government is increasing the province’s borrowing base this year by $ 14.5 billion and had begun selling bonds, including a deal in the British pound struck with U. K. lenders on Wednesday, to take advantage of currently low interest rates.

Ceci said the additional borrowing base would not change the government’s anticipated deficits next year and said, “Alberta still has the best balance sheet in the country.”

The government now expects Alberta’s real gross domestic product to rise 2.4 per cent in 2017 following a 2.8 per cent contraction in the economy in 2016 and a 3.6 per cent contraction in 2015.

That estimate might be conservative given the Conference Board of Canada predicted Alberta’s economy would outpace that of every other province when releasing its own forecast Thursday, which predicted Alberta’s real GDP would grow 2.8 per cent in 2017 as a result of rising oil production.

Ceci said the government would work to balance the budget as the economy improves. Wildrose finance critic Derek Fildebrandt said there was “no force on earth powerful enough” to force the NDP to balance the budget.

As a result of both losses incurred during the wildfire that devastated Fort McMurray and area during the summer of 2016 and a weaker- than- expected economy, the government announced corporate income tax revenues are now expected to be $ 981 million lower than originally forecast.