EDMONTON – Alberta is in the red. The government of Alberta delivered its provincial budget for 2013-2014 Thursday and the numbers paint a very different picture than last year.
“We’re in a deficit,” said Finance Minister Doug Horner Thursday. “I’m not hiding the fact that we’re in a deficit. We’re in a deficit. We are having a tough time here.”
This year, the province introduced a new way of reporting its finances. The 2013-2014 numbers are displayed using the new Fiscal Management Act, which splits revenue and costs into three categories; operational, capital, and savings.
Under this new structure, the province estimates its operational deficit for 2013-2014 is $451 million.
“We have an operating deficit this year. It’s been very rare for Alberta to have an operating deficit. That’s a big deal for me. I don’t want to see operating deficits in the future,” added Horner. Alberta hasn’t had an operational deficit since the 1993-1994 budget, exactly twenty years ago.
However, taking into account all expenses, the province will carry a net deficit of $1.97 billion.
The Sustainability Fund was used to offset a larger deficit.
In addition, it will borrow $8.3 billion for capital projects; $2.5 billion for public-private partnerships, and $5.8 billion in direct borrowing.
This number was not clearly set out in the budget document, and that had many wondering if the government was purposely hiding the numbers.
“No, absolutely not,” responded Horner.
This year, the government is forecasting it will take in $38.6 billion in revenue, which is billions less than it estimated it would make in the 2012 budget.
“The Bitumen Bubble continues to have a severe impact on our revenues,” Horner explained.
In the 2013-2014 budget, the province estimates its operational expenses (or day-to-day expenses) will be $36.4 billion. Alberta’s capital expenses (for longer term infrastructure investments) for the 2013-2014 are pegged at $5.2 billion.
Government officials say they have flat lined spending. The budget does not introduce any new taxes or tax increases. There is also no money in 2013 for increases to public sector employee salaries.
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While the government will hold the line on total operational spending, four departments will see an increase in funding, most notably, Health and Education.
In the 2013-2014 budget, Health will receive an estimated $17.1 billion, an increase of nearly $500 million from last year. However, over the past ten years, the health spending growth rate has been around nine per cent annually, according to the province. This year, it’s a three percent increase.
“While most areas of government are seeing their budgets frozen or reduced, we are increasing our budget by half a billion dollars, reflecting the fact that health care is a priority for Albertans and for the Redford Government,” said Fred Horne, Minister of Health in a news release.
The Health budget will now make up 45 per cent of Alberta’s operational spending.
The government will spend an estimated $6.2 this year on Education, which is about $100 million more than they budgeted to spend last year. This increase will fund enrollment growth and will only maintain current levels of instruction funding.
Funding to Enterprise and Advanced Education has been reduced. In the 2013-2014 budget sees the department getting nearly $2.7 billion, $100 million less than last year. Post secondary institutions will receive $2 billion in base operating grants ($147 million less than last year).
“Operating grants for post-secondary institutions have increased by more than 45 per cent over the past decade,” said Minister of Enterprise and Advanced Education Thomas Lukaszuk in a news release.
“We’ve seen incredible returns on that investment, but such funding increases aren’t sustainable year after year.”
Treasury Board and Finance, Aboriginal Relations, and International and Intergovernmental Relations also saw slight increases in spending.
All other departments will receive close to the same amount they were budgeted last year. The Ministry of Environment and Sustainable Resource Development will receive $305 million less than it did last year (from $822 million in 2012 to $517 million in 2013).
Premier Alison Redford had said spending in this provincial budget would be very lean, far below population growth and inflation, and Finance Minister Doug Horner said tough decisions would have to be made in all departments, and that “nothing should be taken off the table.”
“I don’t know how I could have been more clear over the last six months or so, in saying there is no new money built into this budget for salaries,” Horner said, adding, “this is somewhat of a reset for us too, to get us back to what should be reasonable levels of increase in expenditure. We have to do this; it’s what Albertans asked us to do.”
The Redford Tories have been warning Albertans that tough decision were going to have to be made across the board for months. While the province’s economy remains strong, the government is receiving far less in revenue than it anticipated and blames what it calls the “bitumen bubble.”
“Nobody in other governments, in industry saw this as fast and as hard as it’s coming,” said Horner following the third quarter fiscal update. At that time the province was projecting a funding shortfall of between $3.5 and $4 billion.
The government explained the differential between what Alberta gets paid for its oil compared to what other oil producers get for theirs was the main factor.
In last year’s budget, the deficit was pegged at just $886 million. Revenue was forecast at $40.3 billion and the government said it would spend $41.1 billion. In fact, spending was up $1.3 billion from the 2011-2012 forecast, largely because of investments in health, education, and human services.
However, it seems the days of increased spending are over.
“We took $2 billion out of what the forecast expenditures were going to be. That’s a lot, and there’s going to be a lot of pain.”
Following the rosy forecast revealed in last year’s budget, which included a promise to balance the books by 2013, and the bleaker quarterly updates that followed, opposition parties labeled the 2012 document “the broken promise budget.”
“At the time it was a different outlook,” Horner explained Thursday.
“We decided that we were not going to do it the hack-and-slash way across the board.”
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