The double blow of collapsing oil prices and the COVID-19 crisis have pushed Alberta into a historic deficit of $24.2 billion — more than triple what the United Conservative government projected in its February budget.
“We are continuing to deal with an incredible amount of pandemic uncertainty and economic uncertainty,” said Finance Minister Travis Toews, who delivered his first-quarter economic update Thursday.
“There will be some very difficult days ahead and the road to recovery will be slow.”
The province’s NDP Opposition said the government is lengthening that journey and forcing regular families to pay most of the freight. Finance critic Shannon Phillips criticized the government for ending economic diversification moves and bringing in big corporate tax cuts.
“This is the time for government to change direction,” she said in the legislature.
Toews reeled off a litany of gloom. Government debt is expected to hit $100 billion by the end of the fiscal year next spring. Overall, government revenue is anticipated to drop by $11.5 billion — nearly one-quarter.
Corporate tax revenue is to fall by more than half. Non-renewable resource revenue, the province’s oily lifeblood, is projected to dissipate by 73 per cent.
Nor was the immediate future painted in bright colours.
The update forecasts some growth by next year, but it won’t make up for a nearly nine per cent drop expected in the province’s gross domestic product this year. Employment, now almost 12 per cent, is expected to stay near double-digit levels into 2021.
Toews suggested cuts are coming. He promised a three-year fiscal update in November.
“We will be looking for every opportunity to ensure we are delivering services most cost effectively,” he said. “Alberta can no longer afford to be an outlier in the cost of delivering services.”
A balanced budget is nowhere to be seen.
“Right now would be almost impossible to provide a credible date to balance.”
Taxes, for now, are to remain stable.
“At a time of great economic challenge for so many Albertans and Alberta businesses, to look at raising costs, I believe, would be irresponsible,” Toews said
“In the longer term, it will be important that Albertans have a discussion on revenue structure and tax structure.”
Alberta is one of the lowest-taxed jurisdictions in Canada and remains the only province without a sales tax.
Phillips said the government’s past policies, including cancellation of programs meant to encourage the high-tech and film industries as well as its $4.7-billion tax relief for the oilpatch, have made the problem worse.
“There is billions in spending coming from the government on transfers to the already wealthy and transfers of cash outside this province rather than investing in the pillars of the economy such as health care and education,” she said.
“Why can’t we find at least some money to support Alberta parents?”
Alberta’s dependence on oil and gas revenue was underlined when Saskatchewan released its fiscal update a half hour later on Thursday.
That province is facing the same pandemic and low oil prices, but because its energy industry isn’t nearly as dominant, Saskatchewan is projecting an economic bounce-back to pre-pandemic levels by 2022 and a narrow $125-million surplus by 2024.
Comments