BUDGET HIKES ALBERTA'S DEBT
Pandemic pushes deficit to $18.2B
Alberta's 2021-22 budget predicts a deficit of $18.2 billion and debt ballooning to a record $115.8 billion by the end of the fiscal year, as the province continues to recover from the COVID-19 pandemic and low oil prices.
The budget, tabled Thursday by Finance Minister Travis Toews, points to widespread distribution of the COVID-19 vaccine in the second half of 2021, the rebound of the oil and gas sector and potential changes to the public-sector salary structure as key factors in an eventual fiscal recovery.
Almost a year after the start of the pandemic and the plummeting of global oil prices, Toews said this budget will see Alberta past the economic crisis by focusing on what matters.
“Budget 2021 is founded on these three main themes: Ensuring health care is resourced to deal with the pandemic, positioning the economy for recovery, and ensuring that we're delivering government services most efficiently,” Toews told reporters prior to tabling the document.
Ultimately, Alberta's economy is now expected to reach PRECOVID-19 levels by 2022.
PREDICTIONS FOR OIL PRICES CONSERVATIVE
Total provincial revenue is estimated at $43.7 billion in 202122, or about $1.4 billion higher than the third quarter forecast for 2020-21.
The government credits that to increases in personal income tax and resource revenue. Revenue is forecast to grow by an average of 7.9 per cent over the following two years, reaching $50.9 billion in 2023-24.
The budget expects that global economic activity will pick up in 2021, along with demand for oil.
“As vaccines rollout, optimism and economic projections are improving,” Toews said
Unlike previous years when the government's oil and gas projections have significantly overshot, Thursday's budget predicts more conservative prices, significantly lower than where the companies are listed currently.
The government forecasts the West Texas Intermediate (WTI) oil price at US$46 per barrel for 202122. As of Thursday afternoon, WTI was selling for US$61.49 per barrel.
And it predicts Western Canadian Select (WSC) will sell at US$40.70 per barrel compared to the US$51.67 it was at Thursday.
“I would love to be surprised with much higher energy prices than what we're predicting. But I think that the prudent responsible, approach is to be conservative in our projections,” Toews said.
COVID COSTS STILL HIGH
Of the $61.9 billion on the books as government expenses in 202122, approximately $3 billion is listed for COVID-19 recovery and various contingency plans.
The budget provides Alberta Health with a four per cent increase in expenses, or about $900 million, beyond its COVID-19 costs.
The funding is required in part to follow through on a promise to reduce surgical wait times and backlog, Toews said.
There's also money for continuing care, home care and building new facilities over the next three years, he said.
Taxpayer-supported debt is expected to end 2020-21 at $98 billion. By the end of 2021-22 that will jump to $115.8 billion. Debt servicing costs on taxpayer-supported debt are projected to be $2.3 billion in 2021-22.
The debt works out to more than $600 per Albertan, according to The Canadian Taxpayers Federation.
“Taxpayers are struggling, and they need to see their tax dollars used more efficiently. The pandemic has increased costs for everyone in some areas, but the rest of us have found other ways to save money. The Alberta government doesn't seem to have a coherent plan to find savings,” Alberta director Franco Terrazzano said in a statement.
One cost that is not included as part of the deficit is the government's investment in the Keystone
XL pipeline.
Alberta had committed $1.5-billion along with a $6-billion loan guarantee but in January U.S. President Joe Biden revoked the presidential permit for the border crossing. Thursday's budget acknowledges that as of February 2021 the government had approximately $1.3 billion in exposure from the deal.
“If KXL does not proceed, the Alberta government will explore all options to recoup the investment. Budget 2021 does not include any provisions for expense which may be incurred in that pursuit,” it says.
MORE DEFICITS TO COME
Deficits will continue in Alberta for at least the next few years — $11 billion and $8 billion for 2022-23 and 2023-24 respectively. Last year the government gave up on its promise to balance the budget this term. Toews said clearing the deficit is still a priority once the pandemic ends.
“I am also very disappointed that we can't present a balanced budget in our first term. But simply put, with the drastic drop in Alberta government revenues as a result of this pandemic and economic collapse we simply can't do that,” he said.
In 2020, the province's GDP fell by an estimated 7.8 per cent. In 2021, real GDP is expected to grow by 4.8 per cent and continue to grow for the following three years.
Employment is still well below PRE-COVID-19 levels. The budget predicts employment will improve in the second half of the year, though it is not expected to return to 2019 levels until 2022.
NDP Leader Rachel Notley said the budget is missing a plan to get Albertans back to work or to diversify the economy.
“We needed to see a budget that had a plan to put people back to work, keep young people in Alberta, grow our tech sector and diversify our economy,” she said.
“We needed a plan that would support our communities, invest in health care, protect education, and all those other services that will help Albertans lead Alberta's economic recovery.”
We needed a plan that would support our communities.
PUBLIC SECTOR WAGES
The government is negotiating new contracts with a number of unions, including the province's largest, the Alberta Union of Provincial Employees.
Toews said the public sector salary structure needs to be addressed.
“Simply put, we no longer have the revenue to justify higher comparative wages, especially at a time when many Albertans throughout the province have either experienced a wage reduction — or lost their job entirely,” he said in his budget speech.
The government plans to spend $26.7 billion on public sector compensation in 2021-22, down from $27.5 billion the year before.
AUPE president Guy Smith said the union has not agreed to concessions and nothing has been brought to the table that would make them consider that.
“To be frank we've been preparing our members for the possibility of strike, if we're unable to get a resolution at the bargaining table, and I'm sure the government may be considering locking out its employees. We're still far apart but we're still in the bargaining process,” he said.
According to the budget, government departments and agencies are actually expected to grow by 1,873 full-time equivalent positions in 2021-22. However, excluding thousands of jobs added to Alberta Health Services, there is an overall planned reduction of approximately 1,000 full-time equivalent positions.