Alberta sees record deficit as oil sector slumps

Tue Apr 7, 2009 6:15pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Jeffrey Jones

CALGARY, Alberta (Reuters) - Alberta forecast a C$4.7 billion ($3.8 billion) deficit for 2009-2010 on Tuesday -- its largest ever -- as the oil boom that had sustained Canada's top energy-producing province turned to bust.

Alberta, which delivered 14 straight surpluses as its oil industry pumped out cash, may not be back in the black for four years as it looks to shovel C$23.2 billion into infrastructure like roads, schools, housing and health facilities as well as environmental initiatives, the government said.

The combined budget shortfalls could balloon to as much as C$10.3 billion. They will be funded out of Alberta's newly expanded C$17 billion "sustainability fund," made up of savings from previous surpluses and money that was set aside for capital projects and carbon capture and storage.

The red ink is blamed on projected revenues from energy being slashed by more than half from last year as weak commodity prices and the credit crunch forced the industry to rein in spending. Alberta is one of the largest suppliers of oil and gas to the United States.

Unless the economy recovers, the Conservative government of Premier Ed Stelmach will look to chop C$2 billion a year in spending during the expected deficit period, Finance Minister Iris Evans warned. But she was coy as to what could get cut.

"We recognize there are only two alternatives -- you raise more money, so that means taxing your people, or you reduce your expenditure," Evans said. "We've got some tough choices to make in the future, but Albertans know that this government wants to be the most competitive tax regime in the country."

The government is reluctant to slice infrastructure spending, as that would mean job losses at the worst time, she said. As many as 80,000 jobs will be dependent on the C$7.2 billion earmarked such outlays this year, Evans said.

The government said it aims to start talks with unions to impress upon them the seriousness of the fiscal situation, implying that requests for concessions may be in the offing.   Continued...

<p>A truck drives down a street at Syncrude's oil tar sands operation near Fort McMurray, Alberta in this May 23, 2006 file photo. REUTERS/Todd Korol/Files</p>