Wildfire adds fuel to Alberta’s budget woes
‘NO ATTEMPT WHATSOEVER TO SAVE MONEY,’ WILDROSE SAYS
CA LGA RY • Alberta’s economy is headed for the largest two- year contraction on record, as private sector investment continues to fall, by a projected 16 per cent this year, and the government’s deficit balloons to almost $10.9 billion.
“We are keeping government spending in line while protecting families from reckless cuts to vital public services,” Finance Minister Joe Ceci said Tuesday while delivering the government’s first- quarter fiscal update.
The fiscal update shows the government now expects to borrow $ 7 billion this year for operating expenses — to keep the lights on at govern- ment facilities — which is 31 per cent higher than the $5.4-billion in direct borrowing the province had originally budgeted.
The additional borrowing is partly the result of a draw down from the contingency fund at the end of last year, but it’s also from higher- than-budgeted government expenses and spending. The province is now forecasting $52.3 billion in expenses over the course of 2016, up $ 1.2 billion from the initial budget.
As a result, the full-year deficit for 2016 will grow to nearly $10.9 billion, from a budgeted deficit of roughly $ 10.4 billion. The extra $ 527 million in the deficit could have been larger if not for slightly better than expected government revenues.
In combination with a handful of other factors, a slight rise in oil prices — to US$ 45 per barrel from a budgeted US$ 42 per barrel — will boost government revenues by $708 million, to a total of $42.1 billion.
National Bank Financial managing director and head of public sector research Warren Lovely called the improved oil price forecast “a silver lining” in a research note.
He also said that “in the grand scheme of things, the big moves in Alberta’s credit spreads look to be behind us.”
The oil price rout that began two years ago has led to thousands of job losses and has pushed Alberta’s oildependent economy into the worst recession since the government started recording data in the 1980s.
The first quarter, which runs from April to June for the government, was challenging for the province in large part due to the wildfire that raged around Fort McMurray, Alta.
The government spent $369 million to fight the fire, which disrupted a total of 40 million barrels of oil production over the course of May and June — affecting royalty payments to the province. It also now budgets $ 647 million in disaster relief for the fire-ravaged area.
The province is also pulli ng in l ess money t han budgeted in personal income tax and corporate income tax, as well as less money from taxes on fuel and cigarettes as the fiscal update shows cash- strapped Alber- tans are smoking less, driving less and gambling less than expected.
The official opposition Wildrose Party’s shadow finance minister Derek Fildebrandt said in a release that the government’s plan increases debt and causes “credit downgrades every few months.”
“There is no attempt what- soever to save money or begin to steer us back to balance,” he said in the statement.
Ceci has rejected the opposition’s calls for spending cuts and reiterated his position Tuesday.
“Reckless c uts would only make a tough situation worse,” he said.
Tuesday’s fiscal update also shows the economy is now forecast to shrink by 2.7 per cent in 2016, following a contraction of 3.7 per cent in 2015 — which government officials said was the worst two- year contraction on record, and worse than the brutal recession of 1982-83.
“In the face of the oil price collapse and the economic impact of the wildfires, our government continues to take a prudent approach, controlling our spending, protecting critical public services and taking action to create jobs and diversify our economy,” Ceci said.
Most of the new jobs in Alberta in the last 12 months have been in health care, social assistance and education. Despite those gains, 49,100 net jobs were lost between July, 2015, and the end of last month, the fiscal update shows.
In the last year, 29,000 jobs have been lost in forestry, mining and oil and gas; 28,800 jobs have been lost in manufacturing; and 11,000 jobs have been lost in construction.
The province’s unemployment rate rose to 8.6 per cent in July, after averaging 7.6 per cent in the first half of the year.
The government expects the province’s full- year unemployment rate will average eight per cent.
RECKLESS CUTS WOULD ONLY MAKE A TOUGH SITUATION WORSE.