- The budget projects a deficit of $8.8-billion for 2018-19 and balanced budgets within five years.
- The province’s total debt will hit about $54-billion this year and $96-billion by 2023-24.
- The government will use planned increases to the carbon tax to fund help balance the books. Currently. carbon tax revenue is limited to funding environmental programs and rebates.
- The plan to balance the province’s finances depends on revenues from two pipelines that have not been approved — the Trans Mountain expansion into B.C. and Enbridge Inc.’s Line 3 replacement.
The Alberta government has laid out ambitions to get its budget balanced within five years – including a deficit that drops to below $9-billion in the coming fiscal year. But its blueprint relies heavily on yet unbuilt pipeline capacity and revenues from federally imposed increases to its carbon tax beginning in 2021.
In introducing its 2018-19 budget on Thursday, Alberta’s NDP government said that even as the oil-focused economy improves and it reins in some government capital spending, the province’s debt will continue a steep march upward. The 2018-19 budget says total debt will hit about $54-billion this year and is projected to hit $96-billion by the time Alberta breaks free of deficit spending in 2023-24 – when the government predicts a surplus of $700-million, but annual debt servicing costs will soar to more than $3-billion.
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“That’s what it will take to make sure that we don’t do without the important programs and services Albertans have come to rely on,” said Alberta Finance Minister Joe Ceci.
“We are managing our situation well,” he added. “We will grow our economy and be better off in the long run.”
United Conservative Party Leader Jason Kenney called the fiscal plan “reckless” and unrealistic, especially because it relies heavily on the Trans Mountain pipeline expansion, and predicts significant increases to personal and corporate income taxes. In five years, Mr. Kenney said, “we’ll be spending billions on interest payments to bankers instead of funding public services.”
“If there was any suggestion that the NDP was going to change its course and become fiscally responsible, that was blown out in a spectacular way in today’s NDP budget.”
The government said it wants to continue in its “contract” with Albertans that includes “stimulative” spending on capital projects such as bridges, hospitals and schools, and maintaining public sector employment during the worst years of the recent oil patch downturn. But Premier Rachel Notley’s government said the province has weathered the worst and – after pressure from credit rating agencies – now is the time to work toward eliminating the deficit by 2023-24.
The province ran a deficit of $10.7-billion last year. The current fiscal year’s deficit is expected to come in just above $9-billion, and the government is forecasting a deficit of $8.8-billion for 2018-19 – $1.5 billion less than previously forecast.
The NDP said it will slow the pace of building projects and keep growth in spending stable while maintaining social services − including expanding a school lunch program to 30,000 from 5,000 students. Despite a push to diversify the province’s economy with more upgrading, and by expanding the petrochemical, tech and manufacturing sectors, the forecast is still focused significantly on non-renewable resource revenues. This makes Alberta’s revenues far more volatile than those of most provinces.
What is different is that Alberta has focused on revenues from future carbon tax increases as a significant new source of stable revenue. Alberta’s carbon tax is $30 a tonne now, and revenues go mainly toward consumer rebates, phasing out coal electricity, and other programs to reduce emissions of greenhouse gases.
The federal Liberals have set a national carbon price of $40 a tonne in 2021, and $50 in 2022 – with the revenues flowing to the provinces.
Alberta says in the budget documents the “federally imposed carbon price tied to the construction of the Trans Mountain pipeline” will be used to support general public services. Government officials said revenues from the federally mandated portion of the carbon tax will hit $1-billion by 2023-24.
“As our economy relies less on government stimulus, additional carbon revenue will help to contribute to an improving bottom line,” Mr. Ceci said.
However, Ms. Notley’s government still maintains it will fall into line with Ottawa’s carbon plan only if Kinder Morgan Canada Inc.’s $7.4-billion Trans Mountain pipeline expansion goes ahead.
New pipeline capacity is crucial for Alberta to access new international oil markets, and to capitalize on higher global oil prices. New capacity would also allow the landlocked province to make some progress in reducing the “differential” in the price of its heavy crude required by the additional processing needed for bitumen and the higher transportation costs to distant refineries. The government forecasts the addition of Enbridge Inc.’s Line 3 replacement operating in 2020 and the building of the Trans Mountain expansion by 2021 will lift Alberta’s GDP by about 1.5 per cent-2 per cent by 2023, relative to a scenario without new pipeline capacity.
Mr. Ceci said he is confident those pipeline projects will go ahead, even though they face significant environment and Indigenous opposition – especially in British Columbia.
Kelly Cryderman