National Post (National Edition)
Alberta business slams NDP budget
CALGARY • Alberta Finance Minister Joe Ceci got an earful Monday from Alberta’s business community about his government’s $10.3-billion budget deficit and rapidly rising debt levels as he tried to allay concerns about the province’s fiscal plan.
In a speech to a Calgary Chamber of Commerce breakfast, Ceci defended the budget he tabled last week.
The Alberta showed that the province’s debt would rise to $71 billion by 201920 with plans to return to a balanced budget in 2023 by keeping spending growth below the rate of inflation and population growth.
“A priority for this government is bringing down the deficit thoughtfully over time,” Ceci said, adding he wouldn’t cut frontline public services to balance the budget.
Adam Legge, Calgary Chamber of Commerce president and CEO, called the budget “a disappointment,” using his closing remarks after Ceci’s address to criticize the government’s fiscal planning and said “2023 is too far off” to balance the budget.
“Our view is that hope should not be a strategy,” Legge said, adding the budget is “far too reliant on resource revenues as a driver of our fortune and we have to get off that roller coaster in Alberta.”
Successive provincial governments in Alberta have tried and failed to make the oil-and-gas-producing province less dependent on energy revenues, which drive a boom-and-bust cycle in the region’s economy and also in the province’s revenues.
Legge said last week’s provincial budget doesn’t solve the problem either and “doesn’t take enough of a step toward tackling the deficit. A balanced budget is a better part of a decade away.”
University of Calgary president and vice-chancellor Elizabeth Cannon said she appreciated consistent, stable funding for her postsecondary institution and that “it takes courage to address the business community after a tough budget.”
Business leaders, analysts and credit ratings agencies have widely criticized the provincial government’s plans.
CIBC Capital Markets analysts Maria Berlettano and Andrew Grantham said in a research note the budget “will do little to sway the two U.S. ratings agencies to revise their negative outlooks to stable” and “the possibility of a rating downgrade remains.”
Last week, Moody’s Investor Service and DBRS Ltd. issued reports that criticized Alberta’s deficit and spending plans, saying the debt levels could strain the province’s current credit rating.
Both credit ratings agencies downgraded Alberta’s debt after last year’s budget, making borrowing more expensive.
Ceci addressed the credit rating issue Monday, saying, “I understand and appreciate the credit rating (agencies’) concern.”
Alberta’s debt-to-GDP ratio is projected to jump from 10.6 per cent to 19.5 per cent over the next three years, but Ceci said he didn’t expect the province’s debt servicing costs would rise substantially.
“What we’ll see going forward is an expansion of the economy,” Ceci said, adding the uptick in economic activity should generate more government revenues and help keep debt servicing steady.
The budget projections show, however, that debt servicing costs will soar from 1.9 per cent of total expenditures to 3.9 per cent by 201920.
As for the criticism that his budget was too dependent on an oil price recovery, Ceci said the oil price forecasts his department used are consistent with investment banks’ projections.
The province expects West Texas Intermediate benchmark oil prices would average US$55 per barrel this year, rising to US$68 per barrel in time for the 201920 budget.
WTI prices, which have slipped from over US$54 per barrel at the end of February, remained below US$50 a barrel on Monday. If prices continue to deteriorate, or persist below US$53 per barrel, it could burn through the province’s full-year budget risk-adjustment.
“If we need to re-do our numbers, we’ll do that. Right now, the advice that I’m getting is that there’s a band between US$50 and US$60 that will be achieved in 2017,” Ceci said.