Higher oil price cuts $3.2B from deficit
Shaves $3.2B off budget forecast from February
Stronger-than-expected oil prices reduced Alberta's anticipated 2020-21 deficit to $16.9 billion, $3.2 billion lower than forecast in February.
The province's latest fiscal update, released Wednesday, shows a fourth-quarter uptick in oil prices in part boosted government revenue, with the price of West Texas Intermediate between January and March averaging almost US$60 a barrel.
Finance Minister Travis Toews said at a news conference Wednesday the report reflects major challenges, but the province is seeing positive signs across the economy after being hit hard by the COVID-19 pandemic and energy price collapse.
“The forestry and agriculture industries were strong, and emerging sectors such as tech all contributed to an improved economic outcome and increase in government revenue,” said Toews, adding he is encouraged by the prospect of recovery in the tourism and service sectors as the province reopens.
Toews said he expects a timeline and plan to balance the budget could be announced with the 2022 budget.
He added he hoped once Alberta gets past the pandemic the government will announce a panel to review its revenue structure before the next election in 2023.
Despite some positive trends, Alberta's income still hadn't bounced back to pre-pandemic levels, as it reported $3.1 billion in non-renewable resource revenues in 2020-21, $2.8 billion lower than in 2019-20 and $2 billion lower than originally budgeted.
Alberta spent a total of $5.1 billion fighting COVID-19 and on economic recovery, including on things like personal protective equipment and the vaccine rollout, plus $459 million in capital investment.
Some of this was funded by additional specific federal transfers amounting to $1.8 billion.
Alberta's year-end report also notes that real gross domestic product fell by an estimated 8.2 per cent in the 2020 calendar year, “the largest annual contraction in modern history,” while unemployment rose to 11.4 per cent.
The Conference Board of Canada estimates that Alberta's GDP will expand by more than 7.3 per cent in 2021.
In a report released last week, it noted the province's economic recovery will be one of the fastest in the country, due in part to the province seeing such a big drop in economic activity.
Toews said that while the province had estimated a 22-per-cent net debt-to-gdp ratio in August, as of the end of the year it was down to 19.3 per cent. The government has committed to keeping that ratio below 30 per cent.
Total debt at the end of the 202021 year hit $111 billion, more than $5 billion less than projected in the third quarter. Taxpayer-supported debt was $93 billion, and the total cost to service all debt was almost $2.5 billion.
Revenue for 2020-21 was $43.1 billion, which is $800 million higher than the third-quarter forecast reported in the budget, but $3.1 billion lower than the previous year. That revenue includes the $1.3-billion loss of the government's investment in the now-cancelled Keystone XL pipeline expansion project.
On the spending side of the ledger, total expenses hit $60.1 billion, which is a $1.7-billion increase from 2019-20, and $2.8 billion higher than originally budgeted for 2020-21.
However, when it came to operating expenses aside from COVID-19, the government spent $1.2 billion less than what was budgeted.
NDP finance critic Shannon Phillips accused the government of holding that money back during a year in which many families needed assistance.
“Think of the suffering we could have avoided for so many families that were looking for support if we had just used the money that we were budgeted,” said Phillips.
“We see just a litany of misplaced priorities and a failure to understand what Albertans actually care about and what they actually needed over the last year.”
Officials said much of the $1.2 billion in savings came from a reduction in service usage due to the pandemic, including in physician fee-for-service claims, surgeries, and child-care and income support programs.
Spending in community and social services was $3.8 billion — $252 million or 6.3 per cent lower than in 2019-20, and $137 million lower than budgeted — a decrease the government attributed to lower caseloads in programs for disabled Albertans and in income support, as some clients accessed federal COVID-19 programs.