The Alberta government plans to raise $9.746-billion in debt this year, the largest financing it has done in at least 15 years as the province copes with a painful oil slump.
The province released its 2015-16 budget Thursday, increasing its reliance on debt and taxes to offset the drop in revenue it expects to collect from oil and bitumen royalties. Its debt financing this year is $2.449-billion larger than what the government, in its previous budget, expected it would need when it released its last budget. Alberta is scheduled to run a deficit of $5-billion this year.
Premier Jim Prentice insists Alberta can no longer rely on revenue from oil and gas to carry its finances, as it plans some heavy spending.
The government predicts debt associated with its capital plan will hit $17.7-billion this fiscal year, up from the $11.93-billion sitting on the books now. This debt load will jump to $23.34-billion in 2016-17 and peak in 2018-19 at $31.2-billion.
Finance Minister Robin Campbell said the government is taking on more debt in part because it cannot abandon projects such as twinning the highway to Fort McMurray and building schools.
"We're carrying a little more debt [than compared with past years], but again, we're spending more money on maintenance of infrastructure that we ever had before," he told reporters Thursday.
"Maintaining our triple-A credit rating is essential," he said. "With low interest rates it makes sense to borrow to continue building, especially in an economic downturn when labour may be more available and costs are lower."
Alberta will need to raise roughly $9.746-billion in debt this year to finance its capital plan and debt for provincial corporations. In 2016-17, Alberta will turn to the market for $9.135-billion in debt, compared with its previous plan to raise $6.144-billion. The fundraising drive will drop to $2.8-billion in 2019-20. These figures reflect new and refinanced debt, rather than representing net debt increases.
While the Tories did not introduce a sales tax, Albertans will pay more gas tax as of 12:01 a.m. Thursday, hand over cash under the guise of a health-care levy based on income and pay more for cigarettes and alcohol, and the province's wealthiest will face an increase in income tax. The government, in an attempt to generate more revenue, is raising fees on everything from using the Canmore Nordic Centre to more pricey speeding tickets.
Falling oil prices have punctured Alberta's finances. The benchmark price for oil in North America is roughly $51 (U.S.) per barrel now, down from about $100 per barrel at the beginning of July.
"It is no longer good enough that we go from boom to bust budgets and come up with another set of patchwork solutions," Mr. Prentice said in a statement. "Nor can we pay for day-to-day expenses by relying on unpredictable revenue."
The government expects revenue from non-renewable resources to hit $2.869-billion in 2015-16. By way of comparison, the Tories, under former Premier Alison Redford, predicted Edmonton would collect $9.327-billion from non-renewable resources this year. (Revenue from non-renewable resources is expected to put about $8.79-billion in Alberta's coffers in fiscal 2014-15.)
Oil and bitumen royalties make up the largest share of Alberta's non-renewable resource revenue. The province expects to collect $1.361-billion from bitumen revenue and $594-billion from crude oil royalties this year. This is a steep drop compared with its previous expectation. In its last budget, the government predicted bitumen royalties would bring in $5.962-billion in 2015-16, and oil royalties would be at $1.852-billion. The province's 2015-16 energy figures assume the North American benchmark price for oil will average $54.84 (U.S.) per barrel this year. It also counts on an exchange rate of 81.50 U.S. cents. For every $1 (U.S.) oil falls, the government expects oil revenue to drop by $148-million.
Mr. Prentice has spent months preparing Albertans for his austerity plan. He was steadfast he would not introduce a sales tax, and the health-care premium was expected. Mr. Prentice, for example, specifically discussed the health-care levy Tuesday in a province-wide television address at the expense of taxpayers. Revenue collected from the premium – expected to be $396-million this year and $530-million next year – will go to general revenue rather than be earmarked for health care.
Editor's Note: An earlier online version of this article contained an incorrect number for revenue collected from the health-care premium. This version has been corrected.