EDMONTON – The Stelmach government delivered another big-spending budget today – despite calls for restraint – that takes Alberta deeper into red ink, by beefing up funding to health and education while chopping expenditures in a majority of provincial departments.
Total provincial spending is expected to reach a whopping $38.7 billion in the 2010-11 budget year beginning April 1 – a six per cent increase from last year’s fiscal blueprint – with an expected deficit of $4.7 billion.
Health care and education are the few winners in a budget loaded with cuts across 14 government departments and potential for hundreds of layoffs. However, a better-than-expected revenue picture helped the province avoid the potential $2 billion in overall cuts that it had warned about.
“These are difficult times, and difficult times call for difficult choices,” new Finance Minister Ted Morton said as he delivered his first budget in the legislature. “It is a fair budget. No one group is singled out. Every sector – every Albertan – will be asked to give up a little.”
Capital spending on facilities such as schools, roads and hospitals will be pared back to about $7.2 billion in the new budget year, a decrease of about $750 million from what was originally planned. The province maintains, though, no projects have been axed, but that savings were found through cheaper building costs and delaying some projects.
Also taking a hit is the government’s ballyhooed Municipal Sustainability Initiative, which provides infrastructure cash to Alberta towns and cities. The 10-year deal was to reach its first full installment of $1.4 billion this year, but will now only pay out $826 million. For Calgary, it means $254 million in MSI cash from the new budget – about $151 million less than the city was expecting.
Government spending is fueled by an estimated $34 billion in revenue, including $7.3 billion from energy royalties and land sales, with economic rent from oilsands development emerging as the primary source of oil and gas income.
While spending continues to increase, the province plans to trim expenditures slightly next year (with an additional $1.1 billion in red ink) before a planned return to surplus by 2012-13.
For the upcoming 2010-11 budget year, the Tory government has found $1.3 billion through a cross-ministry savings review which, along with some new cash, was dumped back into priority areas like health care. The entire medical system is now costing the province $15 billion and accounting for more than 40 per cent of the budget.
Alberta Health Services, the Edmonton-based superboard responsible for delivering health care, will see its year-over-year base operating funding increase 17 per cent to $9 billion. The province has also agreed to eliminate the health board’s $1.3-billion deficit through funding increases in both the current budget year and 2010-11.
The Tory regime has promised a five-year funding framework for AHS that provides six per cent operating increases over the next three years and 4.5 per cent in the final two years of the deal.
Education will see a much smaller increase (less than one per cent) to overall program spending that now totals $6.1 billion, but receive a nearly five per cent hike in base operating support to school boards.
For Alberta’s most vulnerable, benefits will remain the same for recipients of the Assured Income for the Severely Handicapped, Alberta Seniors Benefit, while funding remains constant for the Persons with Developmental Disabilities program.
“This government understands the value Albertans place on health care, education and protecting our most vulnerable,” said Premier Ed Stelmach. “Our improved fiscal and economic outlook means we can continue to support these priorities while tightening our spending elsewhere.”
But the overall spending hike means the government must further tap its rainy day Sustainability Fund over the next few years while it piles up debt from borrowing to build capital projects.
To achieve a balanced ledger, the province will deplete the Sustainability Fund down to $2.8 billion by 2012-13 when the province hopes to return to black ink, while its liability on capital projects (including $3.3 billion from direct borrowing, on top of public-private partnerships) will have increased to nearly $6 billion.
The province is also banking on oil and gas prices improving to get it back into a surplus position, expecting oil to average $78.75 US per barrel over the year and natural gas at $4.25 Cdn per gigajoule.
jfekete@theherald.canwest.com
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