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Budget surplus a public relations burden New Alberta government has C$1.1 billion budget surplus from Conservatives it defeated and accused of financial mismanagement GARY PARK For Petroleum News
It was the best of times and the worst of times for the new Alberta government.
In a startling surprise, it landed a C$1.1 billion windfall - a gift from the Conservative government it turned out of office in May, having built its case for the electoral triumph on claims of financial mismanagement by that administration.
The inheritance represented a budget surplus from the 2014-15 fiscal year that ended March 31, about double the original estimate.
The pain for Premier Rachel Notley and her Finance Minister Joe Ceci was having to grudgingly admit the fact, only because it was required by law to do so by the end of June.
“The surplus is a positive thing, of course,” Ceci said after being dragged before news reporters and cameras.
“It’s going to help,” he said, indirectly referring to predictions by defeated Premier Jim Prentice that Alberta could face an oil and natural gas-driven deficit of C$7 billion in 2015-16, although Notley has indicated that could be closer to C$5.4 billion.
But a more accurate calculation will have to wait until October when the Notley government releases a new budget.
Compounding the awkward state of affairs for the incoming administration was news that Alberta’s emergency fund - the so-called “rainy-day” Contingency Account - stands at C$8.2 billion, far exceeding its supposed C$5 billion limit.
In addition, the Alberta Heritage Savings Fund - a close relative of the Alaska Permanent Fund - contains C$18 billion that is available for investment.
Bitumen revenues down, crude, gas up For the last fiscal year, crude bitumen revenues totaled C$5 billion (down C$530 million from the budget estimate), crude oil revenues were C$2.3 billion (up C$226 million) and natural gas revenues were C$989 million (up C$166 million).
Total revenues were C$45.3 billion, with natural resource revenues accounting for barely 18 percent, well below the recent range of 20 percent to 25 percent.
The outlook is less than cheerful, with West Texas Intermediate, Alberta’s crude benchmark, sliding beneath US$60 a barrel fromUS$107 a year ago.
Hikes to taxes Hikes to corporate and income taxes for those earning more than C$125,000 are expected to generate up to C$800 million in the current fiscal year and C$1.55 billion in 2016-17.
Ceci is not ruling out further tax hikes, noting the government needs C$4 billion a month “to make this place go.”
“As a finance minister, I’m always hoping there are additional revenue measures that we can count on,” he said, but would not be drawn into speculating on a possible increase in oil and gas royalties.
Todd Hirsch, chief economist at ATB Financial, warned that the wave of layoffs - including 25,100 jobs in the upstream sector - may not yet be over.
“Over the summer months we will see, I think, a few more probably big announcements and some more layoffs in the oil and gas sector,” he said.
Hirsch said Alberta’s unemployment rate reached 5.8 percent in May and is likely to average 6 percent this year, meaning that over summer and into the fall it will crest to “well above 6 percent.”
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