Low oil price forces Alberta into $5.9B deficit

EDMONTON — Alberta’s finance minister said the province is on track for a record $5.9-billion deficit this year as the oil crunch hits families and businesses. And Joe Ceci said the worst may not be over if low oil prices persist and the province continues in recession.

“If current conditions continue, the final deficit will be in the range of $6.5 billion,” Ceci said as he released first-quarter figures for the 2015-16 fiscal year which began April 1.

Ceci said the NDP government will continue to look for efficiencies, but will not engage in largescale layoffs or deep cuts to erase the red ink. “We are laser focused on taking positive steps toward economic recovery.”

Opposition Wildrose finance critic Derek Fildebrandt calculated the hit to Alberta’s treasury is actually $9 billion when $3 billion drained from the contingency fund and new borrowing for capital projects are added in.

“This is the largest hit that our province has taken to its net wealth in the history of the province, and that should be concerning,” said Fildebrandt.

Monday’s numbers are based on the budget introduced, but never passed, by former Progressive Conservative premier Jim Prentice’s government before it was defeated by Rachel Notley and the NDP in May. That budget estimated a $5-billion deficit.

The new estimates reflect changes made by the NDP, including higher corporate and personal taxes, and more than a billion dollars in new spending for health, education and social services.

Ceci is to bring in a fully revised budget after the house resumes Oct. 26.

Revenue is forecast at $44.3 billion — about $1 million higher than the Prentice budget. The increase is driven mainly by higher-than-expected oil revenue in the spring, more revenue from personal and business taxes and a lower Canadian dollar.

The benchmark North American price for oil, West Texas Intermediate, was originally expected to hover around US$55 a barrel, but in the first three months instead delivered almost $58.

But the revenue figure might shrink in the next update as the WTI price dropped below $40 a barrel in August before rebounding to almost $49 Monday.

It’s also a long way from the dizzying heights of US$100 a barrel reached in the summer of 2014.

Total government expenses are expected to be $50.2 billion, which is about $1.8 billion higher than projected in the Tory budget. The increase is due mainly to $1.4 billion added by the NDP to health, education and social services, as well as to extra costs fighting drought and wildfires.

Debt for capital projects is at about $18 billion and the contingency fund, after the $3-billion withdrawal, will stand at $3.5 billion.

The longer term outlook is not rosy.