Alberta expects first deficit in 15 years

Thu Feb 19, 2009 5:47pm EST
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CALGARY, Alberta (Reuters) - Canada's energy-rich province of Alberta is expected to report its first budget deficit in 15 years this fiscal year, racking up more than $1 billion in red ink as the value of its savings fund sinks.

Provincial Finance Minister Iris Evans said the province will report a balanced operating budget, with revenues equaling expenses for 2008-09.

However, accounting for a 15 percent drop in the value of the province's Heritage Fund, whose worth was last pegged at C$15.8 billion at the end of September, will push Alberta into a deficit, a spokesman for the minister said.

"We're losing money on the Heritage Fund," said Bart Johnson, a spokesman for the minister. "It's kind of a booking thing on the revenue side ... Our investment income is negative."

Alberta has Canada's most robust public finances, largely because of hefty contributions from oil and gas production, and it is debt free.

The province last posted a deficit in 1994 but Evans said she expects Alberta's economy to shrink by 2 percent in 2009, as investment in the oil sands and other industrial sectors dries up.

Plunging oil and gas prices have forced the provincial government to backtrack on a forecast budget surplus, pegged in November at $2 billion, for the fiscal year ending March 31.

Evans said that, despite investment losses from the Heritage Fund, she expects to see about equal revenues and expenses for the year.

"We expect them to balance," she said on a conference call, adding that money that was budgeted but not spent in the 2007-08 budget would help make up for the investment losses.   Continued...