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Alberta budget to include more taxes, reveals $5-billion deficit over next year

Alberta Premier Jim Prentice is shown during a news conference in Vancouver, B.C., on November 3, 2014.

DARRYL DYCK/THE CANADIAN PRESS

The Alberta government is asking residents to pay more taxes and receive fewer services for years to come.

The province will post a record $5-billion deficit over the next year, reflecting a global collapse in oil prices that has depressed Alberta's revenue and sent the provincial economy spiralling.

To balance the province's budget within three years, Alberta will do something it has resisted for nearly three decades: raise income tax rates. It will ditch the 10-per-cent flat tax for those making over $100,000 annually.

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Nearly 60 new or increased taxes will collect $1.5-billion over the next year from nearly every interaction Albertans have with their government. Residents will pay more for marriage certificates, park fees, gasoline and traffic violations.

A new health levy will be automatically added to income tax bills for those making over $50,000 annually. Starting at $200 a year, the tax will climb to a maximum of $1,000 a person.

"We are asking people who can pay a little more to pay a little more," Finance Minister Robin Campbell said.

The budget will serve as an election platform for Premier Jim Prentice, who is expected to call a vote within weeks.

The average Alberta family with two children will pay an estimated $288 more in taxes and fees this year and nearly double that next year, according to the government. The introduction of a provincial sales tax or any hikes to corporate taxes has been ruled out.

There will also be cuts as the government pledges to end years of budget increases that led to the highest salaries for public workers in the country. From now on, Alberta aims to spend at the national average.

"It's the largest tax increase that we've seen in the history of Alberta," said Wildrose Party Leader Heather Forsyth.

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"This is a liberal budget passed by a Conservative government and I think Albertans are going to be quite aghast at what they see."

Alberta's Progressive Conservatives have held power for 43 years and Mr. Prentice is expected to win his first mandate in a general election this spring.

The government is looking to shed more than 2,000 workers, most in health care. Alberta's health budget will fall by $159-million over the next year, the first cut in two decades. Some education programs will also face the axe.

"They're chipping away, bit by bit, from our public service," said Guy Smith, president of the Alberta Union of Provincial Employees. "Our workers have taken zero salary increases over three of the last five years. We've already taken our cuts."

Mr. Prentice has vowed to respect existing collective agreements, although many are set to expire in the next year.

The Alberta government's $48.4-billion budget includes $323-million in cuts this year. However, as budgets continue to lag population growth over the next three years the full impact will be akin to a 9-per-cent reduction.

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The result will be swelling classrooms and longer waits for hospital care. Many schools and clinics in the province's two largest cities are already at capacity.

"We're seeing massive cuts," said NDP Leader Rachel Notley. "There's no way that our health-care system can sustain these kinds of cuts without front-line services being deeply impacted."

After decades of putting little aside and plowing billions of dollars' worth of energy royalties directly into government services, Alberta will no longer rely on oil to balance its books in good times or bad, Mr. Campbell has vowed.

In the past, the province has relied on royalties to cover nearly one-third of the budget. This year, royalties will only represent 6 per cent of revenues. By the end of the decade, the province would like to put half of the royalties aside in its Heritage Fund.

"We're going to get off of oil," Mr. Campbell said, while introducing his first budget. "When times are good, we can put more money in savings or build more infrastructure and when times are bad we won't need to have discussion about whether to cut services."

The province will pillage its rainy-day fund over the next two years, leaving only $1-billion left in savings before it expects to return a balanced budget in 2017-2018.

Despite the shortfall this year, Mr. Prentice's government has said it will not cancel an aggressive program to build more than 100 schools and new highways around the province. Alberta will have nearly $31-billion worth of debt by the end of the decade from its capital spending.

With a report from Jeffrey Jones

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