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Canada's Prime Minister Stephen Harper (L) and Finance Minister Joe Oliver walk to the House of Commons to deliver the federal budget on Parliament Hill in Ottawa April 21, 2015.PATRICK DOYLE/Reuters

The Conservative government's long-promised return to surplus relies on a series of accounting moves that includes slashing the contingency reserve, assuming oil prices will climb and collecting billions more in Employment Insurance premiums than necessary.

While economists say it is of little significance whether federal finances are in a small deficit or small surplus, Prime Minister Stephen Harper and Finance Minister Joe Oliver have made the return to surplus a central political pledge for the Conservatives. "A promise made, a promise kept," Mr. Oliver said in his budget speech Tuesday. "This budget is written in black ink."

The government's critics called it something else: economic sleight of hand.

The 2015 budget promises to climb out of deficit and post a $1.4-billion surplus in 2015-16. That is accomplished, in part, by reducing the size of the annual contingency fund from $3-billion to just $1-billion per year over the next three years. Had Ottawa maintained the contingency fund at the levels used in budgets since 2012, the forecast would show deficits running for another two years.

(Read the full text of the budget speech here)

The government is also keeping Employment Insurance premiums at higher rates than necessary to cover the costs of annual EI benefits. The budget shows the EI account will be in surplus in 2015-16 and that surplus will grow to $5.5-billion the following year. The government says it will balance the account over time by dramatically reducing EI premiums from $1.88 per $100 of insurable earnings to $1.49 in 2017-18.

Finally, while Mr. Oliver's November fiscal update assumed the price of North American crude would remain at the then-current price of $81 (U.S.) per barrel, the 2015 budget took a different approach. It assumes prices will rise to $75 in 2017.

The 2015 budget also assumes oil prices will average $54 in 2015 and then rise to $67 in 2016.

The stunning drop in prices cut the value of oil exports by $40-billion on an annual basis, Mr. Oliver said Tuesday, even as volumes remained broadly unchanged. And while oil prices are generally expected to rise gradually, economists also acknowledge that it is a very unpredictable commodity given the geopolitics at play. The Bank of Canada has said research shows forecasts are more reliable when they simply use the current – or spot – price for oil rather than trying to guess future prices.

A report released in March by RBC assumes an average price of $53 a barrel, which is 43 per cent lower than the average in 2014. The median of analyst estimates gathered in March by Bloomberg was $57.70 a barrel in 2015 and $71 in 2016.

Asset sales, including the recent sale of the government's remaining shares in General Motors, also added $1-billion to Ottawa's bottom line this year, in part because the sale took place after the fiscal year began on April 1.

Queens University economist Don Drummond, who is a former senior Finance Canada official, said the government is playing with the numbers in order to show a budget balance.

"They've played with EI and they've played with the contingency reserve to make it add up to a balanced budget," Mr. Drummond said. "I find it odd and inappropriate to not begin balancing the Employment Insurance account sooner."

The tabling of the budget and a return to surplus in effect draws the political battle lines for the federal election in October. Many of the promised measures, including a planned transit fund, are backloaded, meaning that they only kick in years from now – forcing opposition parties to say they'll undo budget plans.

Mr. Oliver defended his government's accounting, which means the contingency fund has now been reduced to $1-billion for each of the next three years.

"In the past, we haven't had a surplus and we've blown through the contingency," he said. "This year, we're forecasting a surplus and a contingency. You can put the two together if you want or you can keep them separate, but at the end of the day that's the cushion we have for the unexpected and the unavoidable. If neither happens, we will be repaying the debt."

To arrive at its revenue forecasts, the government takes an average growth projection from private-sector economists and translates that into expected federal revenues. Since 2012, Finance has then reduced those expected revenues by $3-billion a year, a measure known as a contingency or adjustment for risk that is meant to cover unforeseen events.

"That's why it's called a contingency fund," said NDP Leader Thomas Mulcair. "It's not something you tap into on budget day because you're missing a couple of billion dollars."

Former assistant parliamentary budget officer Sahir Khan, who is now with the University of Ottawa, said it is "curious" that the contingency has been reduced when groups like the C.D. Howe Institute say the contingency should have been doubled to $6-billion in light of the uncertain economy.

"Oil analysts aren't necessarily certain that the bottom for oil has been determined," he said. "There's still uncertainty out there: geopolitical, there's supply issues…. So that to me suggests you'd want to have prudence in this forecast because we don't know if we're catching a falling knife," he said, using an investor's term for buying a falling stock. "If you look at this budget through the lens of the political objective of hitting a balanced budget, I think you start to have to have all the other pieces fall into place."

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