Alberta forecast to end year with $465M surplus

Although Premier Jim Prentice has repeatedly warned about Alberta ending the year with a $500-million deficit, Tuesday's third-quarter update suggests there may actually be a surplus.

The province is now forecast to end the 2014-15 year $465 million in the black. The figure is $622 million lower than the $1.1 billion predicted in last February’s budget.

However, Finance Minister Robin Campbell said revenues are still expected to drop by $7 billion next year, so government still needs to take measures to reduce spending. 

Higher oil prices in the first half of the fiscal year are still helping with the financial picture. Campbell said the full impact of dropping oil prices won't be known until the spring budget is tabled.

“There are significant challenges ahead," Campbell said in a news conference Tuesday. "There’s no question energy prices are driving Alberta’s fiscal story right now."

The province said the change from a deficit to a surplus comes from a lower Canadian dollar and strong investment numbers, which are now $383 million higher than what was forecast in the budget.

Corporate income taxes were also higher than originally forecast, with an increase of $289 million. However, personal income tax revenue has dropped, resulting in a net gain of $161 million

The projected surplus also raises questions about why the government cut the budgets of the auditor general and the child and youth advocate. Prentice said the numbers presented Tuesday reflected the province's financial situation before Dec. 31. 

“There is no new money in terms of next year," he said. "We're facing the same circumstance that the minister of finance and I have talked about, namely a $7-billion hole in our budget because oil prices have collapsed." 

Opposition not sure what to believe

"I can't quite figure out whether they're setting us up for cuts or whether they're setting us up for a good news picture or what," said Liberal MLA Kent Hehr.

NDP MLA Brian Mason said the sudden switch to a surplus shows the governing Tories don't know what they're doing.

"It’s an indication that they aren’t really sure where they’re at, or where we’re going,” Mason said.

Wildrose MLA Drew Barnes said he believes the real math shows Alberta will have a deficit.

"In my opinion, Prentice is still using the Redford budget tricks of saying we have a surplus but at the same time, we're borrowing $3 billion," said Wildrose MLA Drew Barnes.  "When you add up what they've spent and take it away from what their revenues are and what they borrow, we have a deficit."

Dramatic drop in oil prices

The latest update covers October, November and December 2014, a period where the price of oil took a tumble, dropping 50 per cent since June, and by one-third in the last quarter alone.

The province based the 2014-15 budget on a $95.22 price for West Texas Intermediate crude oil. The price is now adjusted to $79.24. Resource revenue has dropped by $503 million.

GDP is projected to grow by just 0.6 per cent in 2015, compared to the three per cent forecast in the budget. Campbell said that slight growth means that Alberta is not slipping into a recession. 

Alberta is forecast to have one-per-cent employment growth this year — however, that still represents a projected loss of 31,800 jobs from February to December 2015.

Capital spending has dropped by $144 million from the budget, due to projects being “re-profiled” or pushed into the future. Spending in this category is now forecast at $6.5 billion.

The fiscal plan document and the accompanying government news release place a new emphasis on the cost of salaries, projected at $2.6 billion over the next three years. 

The government will honour existing contracts, but Campbell said provincial negotiators will take a hard line in upcoming talks. 

Other numbers in the fiscal update:

• Revenue: $44.8 billion (up $397 million from budget)
• Spending: $44.3 billion (up $1.1 billion from budget)
• Contingency fund: $6.3 billion (up $1.6 billion from budget)