Alberta expects deficit this year and next

Thu Feb 26, 2009 4:49pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Alberta, the province whose oil wealth once made it the envy of Canada, said on Thursday it expects a C$1.4 billion ($1.1 billion) budget shortfall this year, and another deficit next year, due mostly to its drooping investment fund.

The forecasts -- which end 14 straight years of surplus budgets in the western Canadian province of 3.5 million people -- come at a time of falling energy prices and a major slowdown in oil industry activity.

"The dollars that we earned in the first part of the year obviously have helped sustain when oil fell more than $100 a barrel. So that's the good news -- that on the operating side we're relatively in order," Alberta Finance Minister Iris Evans said in her third-quarter update.

"On the investment side, yes, our investments have lost roughly 15 percent, and that's regrettable."

With deficit budgets, Alberta takes its place among Ontario, British Columbia and the federal government, which have all planned for falling revenues and higher spending.

Alberta's Heritage Savings Trust Fund, where the province squirrels away some of its oil and gas revenues, was worth C$14.5 billion at the end of 2008, down C$2.5 billion from the year before amid the global financial meltdown. Other endowments lost about C$500 million of their value.

The major supplier of energy to domestic and U.S. markets now expects 2008-09 revenue of C$35.6 billion against spending of C$37.1 billion.

When the government of Premier Ed Stelmach announced its budget last spring, it forecast a C$1.6 billion surplus.   Continued...