Budget update projects $2 to $3B deficit as resource revenue slumps

EDMONTON – Falling oil revenues and a volatile global marketplace are hammering Alberta’s bottom line and may leave taxpayers with a deficit as large as $3 billion this year, Finance Minister Doug Horner announced Thursday.

Political opponents, however, said mismanagement by Premier Alison Redford’s government is the true culprit.

The original projected deficit in 2012-13 budget was $886 million, but that may end up between $2.3 billion and $3 billion, Horner said as he released the first-quarter update.

Horner said financial crises in Europe, economic uncertainty in the United States, political upheaval in the Middle East and record growth in China make it difficult to peg where world oil prices will go.

“All of these things are frankly beyond our control, but they affect Alberta and they affect our bottom line,” said Horner.

The government won’t incur any long-term debt as the shortfall will be covered by the $6.3-billion Sustainability Fund.

Horner reported that overall revenue decreased by $400 million in the first three months of the fiscal year because of lower oil and bitumen royalties. Expenses increased by $5 million due to disaster funding.

He noted oil has recently fluctuated between about US$109 and US$77 a barrel and currently sits at about US$95.

Horner said the government is taking action to ensure it meets Redford’s promise of balancing the budget by 2014.

“We are tightening our belts,” he said.

He said government departments have been directed to spend less than their budgets and find other efficiencies to save at least $500 million in total.

Ministers have been asked to review their capital budgets to see where money can be saved.

“We will be reviewing every government program and service to ensure every single penny goes towards delivering programs and services that produce demonstrated results,” said Horner.

“(But) we’re not going to cut for the sake of cutting.”

Horner also warned unions to expect a hard line in bargaining.

“There will be no new money for public-service sector negotiations until we see improvement,” he said.

He wouldn’t say which capital projects may be mothballed but, when asked, said the new Royal Alberta Museum project — set to break ground in downtown Edmonton — will go ahead.

On Wednesday, the government announced it was cancelling a $122-million police training college in Fort Macleod, just two months after they awarded the construction contract and just days before shovels were set to turn the earth.

The $886-million deficit figure was presented by the government in its pre-election budget in February. Redford and the Tories went on to win another majority government in April.

The budget boosted government spending by 3.3 per cent to a record $41.1 billion. Program spending went up almost seven per cent, with substantial raises for education, health, cities and money for the most vulnerable.

Opposition critics dismissed the budget as a bag of pre-election goodies, based on unattainable oil forecasts, that would be clawed back after the election.

On Thursday, Wildrose critic Kerry Towle said that, unfortunately for taxpayers, the critics were proven correct.

“This government has no plan, has no idea where they’re going to cut and they’re just doing it arbitrarily. They’re picking from the pot and they’re just taking from everyday hardworking Albertans,” said Towle.

NDP critic Dave Eggen said it’s difficult to fathom how a province leading the nation in economic growth, with a rising population, the lowest unemployment rate, and oil in the $90-a-barrel range can’t balance the books.

“What this minister is saying this morning doesn’t make any sense,” said Eggen.

“We have an economy that’s growing and yet the government can’t manage to balance the budget or have adequate revenue to fund the programs that Albertans need.”

In a news release, Liberal leader Raj Sherman call the government’s spending plans a “fudget budget.”

“Redford made irresponsible spending promises before the election to buy votes; she predicted overly rosy resource revenues and can’t get her spending priorities in check. It was always a recipe for a fiscal disaster.”

Scott Hennig of the Canadian Taxpayers Federation said what was not in the budget update was more telling than what it contained.

Hennig noted the update report broke sharply from past practice. The report contained few numbers and almost none of the supporting data that would allow the public to understand how the government arrived at its numbers and projections.

The government also cancelled the customary technical briefing for reporters. Such briefings allow journalists to talk off the record to department officials to better understand the minutiae and the context of the data before asking questions of the finance minister.

Horner told the news conference that such a briefing was cancelled because it would sow more confusion than clarity.

“The reality is if we have to do a technical briefing for you (reporter) folks, how do we expect that Albertans are going to understand what I am telling them?” he said.

Hennig said the lack of information should alarm taxpayers.

“This is not a budget update. This is a brochure,” said Hennig.

“I’ve been doing this for seven years. This is the most ridiculous thing I’ve ever seen handed out at a quarterly budget update. They usually provide, you know, numbers and estimates going forward, not (just) a chart saying things are volatile.”

Hennig said the Redford administration is starting to resemble the government of former premier Don Getty in the 1908s, when plunging oil revenues prompted then finance minister Dick Johnston to repackage, recast, and recategorize budget figures.

“When governments start hiding their numbers, be worried,” he said.

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