Alberta Premier Alison Redford has once again confirmed what her Progressive Conservative government has been suggesting for weeks: it won’t be able to balance the province’s budget next year.
Instead, low natural gas prices are hurting provincial coffers, forcing a revised date to erase Alberta’s deficit by the spring of 2014. Ms. Redford announced the reversal from her longtime pledge, which was a key issue in last spring’s election, in an email circulated Monday to Tory party supporters.
“We have a balanced operational budget but have a shortfall when it comes to capital spending,” she wrote, “We could easily balance that part of the leger as well if we cancelled all capital projects such as critically needed hospitals and road(s) or the many needed new schools. We have chosen to bear the criticism of having an unbalanced budget rather than abandon those needed projects.”
Last month, the province revealed that resource revenues in the first six months of the fiscal year were down $1.4-billion compared to expectations. The province still expects a $2.3-billion to $3-billion annual deficit, the same number it projected in its first-quarter update.
Still, the province continues to rely on oil price expectations that are more optimistic than figures on the street.
The government also used its second-quarter fiscal update to pave the way for borrowing, something cabinet ministers also floated during the party’s annual convention last month. That raised the hackles of opposition members, who in turned warned of the Tories returning the province to debt.
During the second-quarter fiscal update, Finance Minister Doug Horner said while Alberta’s rainy day sustainability fund is expected to sink to $3.7-billion at the end of this fiscal year, borrowing will be done for capital projects rather than government operations.
“What we are doing is making a long-term investment that will pay off for the future,” he explained, “It’s like taking a mortgage out on your house.”
Ms. Redford said spending cuts in other areas will help the province meet a balanced budget by the revised timeframe, which could still come in the next fiscal year. That goal could further be aided by a period of growth in the resource sector.
“The economies of Alberta and Saskatchewan are an island within North America,” Ms. Redford wrote.
Still, she warned that growth is a “two-sided coin.”
“The other side is the pressure it puts on our province to provide and maintain infrastructure and services with limited financial resources,” she wrote.