Alberta Premier Alison Redford is signalling she will not roll out an austerity-minded budget as her government confronts an unexpectedly growing deficit, instead pledging new spending aimed at making her province less dependent on oil.
In an interview in Washington on the weekend, Ms. Redford addressed the debt-and-deficit issue more in the style of President Barack Obama than Ralph Klein, the former Progressive Conservative premier who made balancing budgets his overarching priority.
She indicated a certain comfort with running a deficit, at least for now, in next month's budget. To be sure, the government will be "tightening our our belts," seeking savings through efficiencies and scrapping redundant programs, she said. But the Premier said her priority will be spending to support Alberta's non-oil economy, a list of industries including agriculture, forestry, health research and green technology.
Fresh budget projections earlier this month put Alberta on track for a shortfall of as much as $4-billion in the current fiscal year, four times greater than the previous estimate in December.
"We don't want to be the same as other governments in Alberta that sort of cross their fingers and hope the price of oil goes up," Ms. Redford said on Saturday at the Canadian embassy, where she paused during a weekend of meetings with U.S. officials who were attending the winter meeting of the National Governors Association.
"Our budget on March 7 is going to make some pretty fundamental shifts in our fiscal framework that try to reduce the dependency on that."
Asked if that meant she is willing to spend on her priorities, even in the face of a widening shortfall, Ms. Redford said: "Yes. We are."
A less-than-religious approach to deficit reduction risks a political backlash in Alberta, where the Official Opposition insists a balanced budget should be the government's main priority. "She's going to be judged on this in the next election," Danielle Smith, the leader of the Wildrose Party, said in a telephone interview from High River, Alta. "This is a flawed strategy," she added. "Politicians are not entrepreneurs."
A sharp drop in the price of crude oil extracted from the oil sands over the final months of 2012 is costing the provincial government dearly in lost revenue from royalties and corporate profits, a shortfall driven in part by the increasingly aggressive price forecasts the government has adopted.
The global economy failed to gain significant momentum in 2012, reducing demand for oil. For Canada's oil producers, the international demand problem was magnified by increased production in the United States, causing a supply glut.
Alberta's revenue from resources over the first three quarters of the fiscal year was more than $2-billion below initial projections, the government reported last week. To an extent, Ms. Redford's cabinet has been burned by taking a more optimistic approach to forecasting oil markets. Mr. Klein, for example, tended to shape his budgets around energy prices that were well below the consensus of private forecasters. When setting out her current budget, Ms. Redford stuck close to the mean.
Ms. Redford emphasized that "no one" saw the gap between the Canadian oil price and international benchmarks widening as quickly – and by as much – as it did last year. The Premier expressed optimism that the differential between the two will narrow to historic norms in time, as new pipelines are laid and producers adopt other means, such as railways, to get their product to refineries.
The primary reason for her visit to Washington was to rally American power brokers to get behind the Keystone XL pipeline from Alberta to Texas, which requires White House approval.
Ms. Redford said she knows she isn't the first Alberta premier to talk about economic diversification – and Ms. Smith surely will remind her at every opportunity that all the others mostly failed. But Ms. Redford insisted her government will be different.
"We're going to do it," she said. "We have some difficult short-term challenges, but we have to keep investing in our communities."