Alberta budget goes heavily into the red to fight economic downturn
Province's debt forecast to hit $57.6B by 2019
The Alberta NDP government is borrowing billions of dollars to finance its operations and will exceed its own legislated debt ceiling in three years.
Details in the Alberta 2016 budget released Thursday show the debt-to-nominal-GDP ratio that was set by the government at 15 per cent last fall is forecast to hit 15.5 per cent by 2019. That means the government will have to introduce new legislation eliminating the debt ceiling five months after putting it in place.
"I'm aiming to balance the budget by 2024," Finance Minister Joe Ceci said in a pre-budget news conference. "To balance sooner would require that we undertake brutal cuts to health and education and pretty much every service provided by government."
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The budget contains details of a new carbon tax, the centrepiece of the government's climate change plan. It lays out several new programs to create jobs and diversify the economy.
Brian Jean, leader of the Official Opposition Wildrose Party, said the carbon tax will cost the average Alberta family $1,000. He said the rebates for low- and middle-income Albertans will not offset higher costs for consumer goods and electricity.
"The NDP have put us on a path of unlimited borrowing and zero timelines for getting our province back to balance," Jean said. "Credit downgrades are coming. They will cost Alberta families more."
Although the budget is touted as the Alberta Jobs Plan, only $250 million over two years has been specifically set aside for job creation. That includes $165 million in tax credits to encourage investment in Alberta, $35 million to attract and support new businesses and $25 million for apprenticeship and training programs.
The government plans to reduce the small business tax rate from three per cent to two per cent. Ceci said these initiatives should create 100,000 private sector jobs in over three years.
Royalty revenues are expected to drop by 90 per cent, to $1.4 billion, in the coming fiscal year, the lowest in 40 years . The budget contains no new taxes outside the carbon tax: no provincial sales tax and no new markups on cigarettes, beer or liquor.
Ceci said he won't introduce a sales tax because Albertans don't want one.
"We will manage our way through this by reducing the cost of our operations," he said.
No plan to pay down debt
Total debt is projected to hit $57.6 billion by 2019. The government is completely drawing down the contingency account and borrowing $5.4 billion to cover operating costs this year. The government last borrowed to finance daily operations in 1994.
As announced earlier, the deficit is forecast at $10.4 billion under a worst-case scenario of the West Texas Intermediate oil price staying at an average $36. If oil prices increase on average to $42, the deficit is projected at $9.7 billion.
In light of these numbers, the government is attempting to cut operating spending by $600 million over the next two years.
Health-care costs have increased by six per cent on average over the past six years. The government says it is planning to hold that increase to an average 2.5 per cent over three years.
Declining revenues mean some campaign promises like the reduction or elimination of mandatory school fees, estimated at $105.6 million last year, have been put aside for now.
The government announced it will be consolidating or eliminating 26 agencies, boards and commissions to save $33 million over three years.
Ceci said debt payment isn't possible while the government is running a deficit.
"Until we come to balance, until our deficit is eliminated, until we start to top up our contingency account, we will not be able to pay down the debt we are currently experiencing," he said.
Albertans are seeing the first details of the carbon tax, which comes into effect on Jan. 1, 2017.
The tax will be levied on gasoline and diesel at the pump, as well as home heating fuel. In 2017, Albertans will pay an additional 4.49 cents a litre, increasing to 6.73 cents a litre on Jan. 1, 2018,
Full and partial rebates will be offered to singles earning up to $51,250 net income annually and couples earning up to $100,000. The net income cutoff for couples with two children is $101,000.
Rebates will rise in 2018 when the levy increases to $30 a tonne from $20.
Money to finish school-building plan
The government is setting aside money to fulfil its previously announced $34-billion five-year infrastructure program.
The ambitious school construction and modernization plan launched by the previous government will receive $2.9 billion to complete.
Affordable housing construction and renovation wlll get $892 million over five years, a $500-million hike compared with what was planned last fall.
The Alberta child benefit and enhanced Alberta family employment tax credit, announced last fall, will go ahead this summer.
For the first time, the budget also provides details of funded and unfunded capital projects, the so-called infrastructure sunshine list. Projects scheduled for funding in 2016 include the Peace River Bridge, the Calgary and Edmonton ring roads and the Calgary Cancer Centre.
