One of Alberta's most controversial policies – the bundle of legislation tied to climate change – has forced the province to add over $1-billion to its expenses for the current fiscal year, a hit that comes as the government expects the deficit to exceed its original prediction despite more cash flowing into its coffers thanks to a healthier oil and gas sector.
Alberta predicts the deficit will reach $10.8-billion in 2016/2017, climbing roughly $444-million from its budget last April but keeping in line with previous revisions. At the same time, the government believes revenue will hit $42.9-billion, an increase of $1.5-billion compared to the original budget. Rosier predictions for revenue from non-renewable resources such as oil make up $1-billion of the $1.5-billion revision, according to the third-quarter fiscal update released Thursday.
The government's decision to accelerate the plan to phase out coal-fired electricity accounts for the most significant expense increase in the updated budget. Alberta's right-leaning politicians and voters want to eliminate these policies, and doing so would immediately lower the government's revised expenses. Critics immediately criticized the government for the cost associated with the coal plan.
The government now expects expenses to total $53.7-billion, up $2.6-billion from the original budget. The province concedes it will spend more in departments such as health and education, but attributes nearly half of the expense increase to the way it is accounting for payouts tied to its 14-year plan to phase out coal-fired electricity. The government notes $1.1-billion of its expense increase is a "one-time" recording, rather than cash immediately leaving the province's coffers. In turn, future budgets would not reflect significant expenses tied to the accelerated phase-out strategy. The auditor-general and finance officials debated whether the 14-year expense should be recorded as a lump sum or spread out over the years, and the government eventually sided with the watchdog.
"A full economic recovery will take time after such a long downturn, but we are starting to see encouraging signs for Alberta in the year ahead," Joe Ceci, Alberta's Finance Minister, said in a statement. Alberta's economy, the government predicts, will climb by 2.4 per cent in 2017. Again, this largely reflects a stronger energy sector. The NDP will release its 2017/2018 budget in March.
Meanwhile, the Wildrose Party argues the $1.1-billion earmarked for coal payouts is unnecessary.
"Every single penny is purely wasted," Derek Fildebrandt, a Wildrose Member of the Legislature, said. "They may as well have taken that billion dollars, piled it into a pyramid, and lit it on fire."
Jason Kenney, the former federal cabinet minister and front-runner in Alberta's Progressive Conservative leadership race, also wants to eliminate government's plans to accelerate the phase-out of coal and carbon levies.
The Conference Board of Canada agrees with Mr. Ceci's tepidly optimistic outlook. Alberta, the organization said Thursday, will have the strongest economic growth in Canada in 2017.
"Along with a big increase in oil production, some of the growth in Alberta will come from the rebuilding efforts in Fort McMurray," Marie-Christine Bernard, an associate director of provincial forecast at the Conference Board, said in a statement. "However, we expect more subdued economic growth next year as oil prices are not expected to increase very much."
Alberta's health department intends to spend $19.2-billion this fiscal year, up $284-million from its April plans. The NDP attributed this to "health-system pressures and drug costs." Support for "social services related to the [economic] downturn" is expected to add $179-million to Alberta's expense column. Education spending will climb $104-million, to top out at $19.2-billion in 2016/2017, according to the province's revised forecasts.