Alberta borrowing $4.3B to make up budget shortfall

The Alberta government is facing a $1.97-billion deficit and is borrowing $4.3 billion to pay for capital projects and to make up what Finance Minister Doug Horner called a "cash requirement" of $6.3 billion in the 2013-14 provincial budget.

The budget — unveiled Thursday in the face of a $6.2-billion loss in non-renewable resource revenues because of dropping oil prices — contains program cuts but no increase in expenditures and no new taxes.

The government will spend $5.2 billion on infrastructure projects over the next two years and $4.7 billion in the third and final year of the 2013-16 capital plan.

Horner defended the expenditures, saying that the province was expected to grow to five million residents over the next 17 years and they need roads, schools and hospitals.

He said the government was holding the line on spending and that could hurt.

"We're in a deficit. I'm not hiding the fact that we’re in a deficit," Horner said in a pre-speech news conference. "We are having a tough time here. We could have cut another billion dollars out. That would have been great for numbers but it's not the responsible thing to do."

The operational deficit is estimated at $451 million, but figuring out the overall deficit was a difficult task this year.

Reaction from opposition party leaders was critical.

"It is a historic day, it is a historically sad day," said Wildrose Leader Danielle Smith. "This is the 'back-in-debt' budget… this premier is plunging this province back into debt. Significant debt.

"She's been calling this a 'once in a generation' budget. She's right about that. It took a generation to pay off the Getty debt. It is going to take a generation to pay off the Redford debt as well."

As expected, the government broke down the budget into three sections: operations, capital and savings, and did not offer a deficit figure as in previous budgets.

NDP Leader Brian Mason believes this was done to make it difficult for Albertans to compare the year to year figures.

"Basically, they are throwing sand in the face of Albertans who are trying to understand the budget," he said.

The Alberta Director of the Canadian Taxpayers Federation, Derek Fildebrandt, also took issue with the way that the budget was presented. He says that the province's plan to borrow to cover most of the shortfall is an attempt to gloss over the difference between Alberta's revenues and its expenses.

"Really most critically, really more important than any of the numbers is the changing in the accounting here… they have cooked the books in an unprecedented way here to hide the deficit," he said.

"By our calculations the real deficit for 2012 — the current fiscal year — is at least $6 billion."

Fildebrandt also said while much of the focus is on the province's operational budget, more reductions are needed in capital spending.

"But while they've frozen spending on the operational side for just one year, they're going to town — they're pretty much going vegas style on the capital side. We are going to be borrowing… this current fiscal year that we're finishing up and the next two years we're going to borrow about $20 billion."

Starting next year, the province plans to start saving resource revenue – the first $5 billion will go into a short-term contingency account that will replace the sustainability fund; any additional earnings will go to the Heritage Savings Trust Fund or other endowment funds.

The government claims this will raise its overall savings to $24 billion by the end of 2016.

The budget forecasts growth of 2.9 per cent in 2013. The price of West Texas Intermediate oil is forecast at $92.50 US a barrel and the price of Western Canadian Select is projected at $68.21 a barrel.

No money for salary hikes

There is no additional money budgeted for compensation for physicians, teachers and other public servants.  Horner has already announced a three-year salary freeze for all public service managers as well as a 10 per cent reduction in their numbers – about 480 positions.

Thirty full-time jobs will be cut from the Agriculture department. Education will lose 51 full-time positions and 35 secondments. Tourism and the Executive Council are also losing positions.

Alberta Health Services is getting a three per cent increase in funding, but it’s a drop from the 4.5 increase promised when a five-year funding plan was revealed in 2010.

The government is setting aside $503 million over three years to build 50 new schools and renovate 70 more, a promise Premier Alison Redford made during last spring’s election.

A number of government departments are facing cuts. Human Services and Environment and Sustainable Resource Development are losing $9 million and $22 million respectively.

The Human Services cut is mostly due to last year's consolidation of several government departments into one super-ministry.

The province is cutting $4 million in fire contracts and $6 million in grants from the budget for the Environment and SRD department.

The $41-million Alberta Initiative for School Improvements is ending. The loss of the program comes as a shock to school boards across the province, according to Jacquie Hansen, president of the board of directors for the Alberta School Boards Association.

"It's a program that allows schools to think outside the box, get creative," she said.

Hansen says AISI program has been largely successful, but has been strained since its budget was cut in half in 2011. With the fund set to be eliminated in April, she says school boards will have to scramble to deal with the change.

"The whole notion of moving ahead in 21st century learning is compromised."

The province is also cutting $22 million from the fuel price contingency grant program for schools.

As suspected, the Summer Temporary Employment Program, a $7.4-million program that funded 3,000 student jobs, has been suspended.

The province is not funding the $300 million in upgrades planned for Highway 881 as part of the Highway 63 twinning over the next three years.

Albertans will also start to see a new fee of 44 cents a month on their cell phone bills to fund 911 service.

The government is also tightening up income requirements for Alberta Seniors Benefits.

Alimony, workers compensation and Canada disability payments will be taken into account when evaluating eligibility, a change expected to affect 6,000 seniors.

Seniors will also have to live in Canada for 10 years before they can qualify for benefits.

The government is also ending the $15-million Community Spirit Program.

Advanced Education is chopping $147 million in operating grants for colleges and universities but there will be no increases to tuitions beyond the expected cost of living increases.  

MSI funding for municipalities is $896 million this year, down from $1 billion: $170 million for Edmonton and $254 million for Calgary. There is no additional funding for Edmonton's downtown arena.

The new Fiscal Management Act will compel the government to save resource revenues starting in 2015-16, though there are plans to start setting aside money this year.

Under the act, the government would save five per cent of the first 10 per cent of resource revenue; 25 per cent of the next $5 billion and 50 per of all revenue that exceeds $15 billion.