Province should be in black by 2014-15
Alberta’s six-year deficit streak should end in 2014-15 with a $555-million surplus, according to calculations based on the Redford government’s threeyear financial blueprint released Thursday.
The 2013-14 budget failed to fulfil the Progressive Conservative promise to balance Alberta’s books immediately without tapping into savings. Instead, the government expects a $1.97-billion deficit, in addition to $4.3 billion of borrowing for construction projects that include new schools, road improvements and health care facilities.
Finance Minister Doug Horner said he is not happy about another deficit year in 2013-14, but the government expects that situation will improve as the price for Alberta oil rebounds.
“The operating deficits we’re seeing today are caused by that differential that we’re seeing in the bitumen bubble,” Horner said Friday after speaking to the Calgary Chamber of Commerce. “We do anticipate that is going to mitigate itself over the next 12 to 18 months.”
Horner said the government cut $2 billion in operating and capital spending in 2013-14.
“We didn’t do that last year,” he said. “I think we are reacting to the situation. We’re going to do it in a responsible way, though. We are not going to hack and slash.”
Opposition leaders say they find it hard to believe any of the government’s financial promises or projections after the $886-million deficit predicted for 2012-13 ballooned to $3.9 billion, and many of Premier Alison Redford’s election promises have gone unfulfilled.
And they accused the government of trying to hide the real deficit with its new budget format.
The government presented the 2013-14 budget in a new way, breaking up spending and revenue into three areas: operating, capital and savings plans.
On the operating side — which accounts for day-to-day expenses such as salaries and program costs — the government plans for a $451-million deficit in 2013-14.
That is projected to turn into a $1.48 billion surplus in 201415.
The numbers are different, however, if you add all the components of the budget together, as Alberta governments have for decades.
While government officials were willing to report Thursday that Alberta could expect a $1.97-billion deficit under the old accounting system, they will no longer provide such calculations beyond the current fiscal year.
Alberta Finance spokesman Chris Bourdeau said they offered the comparison this year to help with the transition. “We provided that calculation so people could compare the new format with the old format, but moving forward, we will be presenting the number in our new format,” Bourdeau said.
But a CIBC World Markets analysis of the budget estimates for the next three years does calculate the balances for 2014-15 and 2015-16 based on the old consolidated format.
“Alberta’s much anticipated budget ushered in a new fiscal framework, outlining an operational balance that, while in deficit in 2012-13 and 2013-14, is expected to be back in the black come 2014/15,” said the CIBC budget brief.
That surplus is projected to be $555 million in 2014-15 and $2.63 billion in 2015-16, according to CIBC’s calculations using the old methodology.
“While deficits and increased borrowing are leading to a reduction in net financial assets, Alberta remains the only province in Canada without any net debt — an enviable financial position if there ever was one,” the CIBC analysis concludes.
Redford told Calgary Herald columnist Don Braid Friday the province will return to surplus next year, under both the old and new accounting mechanisms.