‘This is ugly,’ critics say as Alberta government predicts budget deficit could hit $3 billion – In first-quarter update, province forecasts deficit between $2.3 billion and $3 billion

By Kelly Cryderman, Calgary Herald August 31, 2012 6:25 AM

The provincial government signalled Thursday it will cap spending, look for at least $500 million in savings and re-evaluate all planned building projects as it grapples with lower-than-predicted energy revenues and a growing deficit now projected to surge as high as $3 billion this year.

However, critics were quick to pounce on the “bad news” first-quarter fiscal update delivered by Finance Minister Doug Horner, blaming the Conservative government’s performance as a weak financial manager rather than any wild swings in the global economy or energy prices.

“This is ugly,” said Canadian Taxpayers Federation’s Scott Hennig, summing up the numbers. “They’ve had a lot of bad news quarters.”

In the February budget, the Redford government predicted it would post a more manageable $886-million deficit for the 2012-13 fiscal year. But in its first-quarter update Thursday, the province forecast a deficit between $2.3 billion and $3 billion this year.

Horner said the government will take a number of steps – without raising taxes or imposing drastic cutbacks – to improve the province’s financial health.

All departments will be asked to find $500 million in “in-year savings,” up from $360 million requested in the budget.

All government ministries have also been asked to review capital projects to see what can be delayed or cancelled – although at this point nothing is specifically on the chopping block, Horner said.

In fact, the finance minister said the decision earlier this week to quash the longplanned police college in Fort Macleod wasn’t a financial decision, but based on merit.

But later, when discussing the tough spending decisions ministries will make on capital projects, Horner said “the police college was a very good example of this.”

Despite $400-million less in energy revenues during the first three months of this fiscal year, Horner insisted the province remains on track to record a balanced budget in 2013-14.

He blamed sagging energy revenues in the first three months of the budget year on lower-than-predicted bitumen royalties, conventional oil revenues and Crown lease sales.

In February, the government predicted oil prices would average $99.25 US a barrel this fiscal year. However, it now projects oil averaging $92.75 per barrel for the year. The government also revised its natural gas price to $2 per gigajoule, down from $3 in the budget.

“It’s a bit of a roller-coaster,” Horner said at the legislature.

However, Hennig said the government originally made wildly optimistic projections for other revenue streams, including corporate profits.

More importantly, he added, the fiscal document was significantly pared down compared with past quarterly reports, suggesting the government has something to hide.

He said the “brochure” was scant on financial details or what Albertans could expect in the months ahead.

“I wouldn’t trust anyone who wouldn’t show me any numbers,” Hennig said.

Horner told reporters that he wanted a more “meaningful” and “understandable” report.

Critics have argued Alberta’s Progressive Conservative government is over-reliant on volatile energy revenues and too optimistic recently in its energy price predictions.

The Wildrose party immediately criticized the government Thursday for failing to balance the budget with oil currently above $90 a barrel, saying their decision put core government programs at risk.

Wildrose MLA Rob Anderson charged the Conservative party was disingenuous to campaign this spring on spending hundreds of millions of dollars for new schools, roads and other programs, while still balancing the books.

“It shows that the preelection Alison Wonderland budget was deceitful, and I believe intentionally so.”

The province has a number of ambitious capital plans still on the books, including adding passing lanes to Highway 63 this year and a promise to build 50 new schools over four years. In June, Health Minister Fred Horne said a new cancer centre in Calgary was once again on the government’s radar.

Horner said Thursday he didn’t want to talk about which capital projects would live or die, but did volunteer that the new Royal Alberta Museum project in downtown Edmonton will go ahead.

Mount Royal University political scientist Duane Bratt said the first-quarter update gives opposition parties new fodder to criticize the governing Tories during the legislature sitting in October.

“It’s not what (the Conservatives) said when they produced their budget, and not what they promised during the election campaign.”

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