|
A stunning budget blow for Alberta
Gary Park For Petroleum News
By any standards, it’s a stunning reversal for the Alberta government after 15 straight years of budget surpluses.
A rueful Finance Minister Iris Evans had the job of spreading the bad news that the once resource-rich province was heading for a C$1 billion deficit in the 2008-09 fiscal year that ends March 31, just six months after forecasting a surplus of C$8.5 billion.
Government officials said most of the drop in revenue is the result of a multibillion-dollar decline in the value of the Alberta Heritage savings Trust Fund — a second cousin to the Alaska Permanent Fund — which stood at C$17 billion at the end of 2007-08 and has shed 14.5 percent of its value this fiscal year.
The province has been clobbered by “plunging energy prices, unsettled international financial markets, a drop in demand for our exports and other effects of the global recession,” Evans said.
The government will not be in breach of its anti-deficit legislation because the law does not apply when nonrenewable resource revenues come in lower than forecast.
Evans said the government has sufficient unallocated funds to address its deficit without dipping into Alberta’s C$7.7 billion “emergency” fund.
She said there is no doubt Alberta has entered a sharp recession, estimating that 15,000 Albertans will lose their jobs this year.
“We’ve always said that we were not immune to the global recession,” Evans said.
“This is like riding a very bad tidal wave, but in the best boat possible. Alberta has absolutely got more resources available to it than anybody else facing a decline,” she said.
Carbon spending still on Evans and Environment Minister Rob Renner said the bad budget news won’t affect the government’s commitment to spend C$2 billion on a carbon capture and storage plan aimed at reducing greenhouse gases in the atmosphere and sprucing up Alberta’s environmental image.
Evan described the plan as “the lighthouse … the single most important pinnacle” in the government’s strategy to green Alberta.
“By putting C$2 billion up front … we sustain our economy and we follow through with the commitment (Premier Ed Stelmach) made to the world that we are going to find the best possible solutions to the environment,” she said.
“We already have industries that have invested millions of dollars to prepare for making Alberta sustainable in its resource economy, environmentally friendlier. The investment … is something that we committed to, not only to Albertans, but to Canadians.”
Besides, Evans was making her disclosure about the same time that President Barack Obama and Prime Minister Stephen Harper agreed to start a clean-energy “dialogue” targeting a reduction in greenhouse gas emissions.
Spending concerns David Swann, leader of the Alberta Liberal party, said the deficit disclosure affirms warnings that government spending was out of control and that it was not doing enough to build a “rainy day” fund to carry it through tough times.
“We’ve spent everything that’s come out of the ground,” he said.
Scott Hennig, Alberta director of the Canadian taxpayers’ Federation, compared the situation to deficit financing in the 1980s after oil prices made a sharp dive.
In 1986, the Alberta government decided to run a deficit of C$5 billion in the hopes of getting through the next year until oil rebounded. Instead, it ran eight successive deficit budgets until massive spending cuts were made in 1992-93.
“This is the choice: The government is either going to have to make a small cut now, or make massive cuts in two or three years, unless oil prices go back up to $100 or $150 a barrel,” he said.
| 