April 14, 2016 / 9:24 PM / in a year

Canada's Alberta to post C$10.4 deficit as oil price slump bites

CALGARY, Alberta, April 14 (Reuters) - The Canadian crude-producing province of Alberta said on Thursday it will post a C$10.4 billion ($8.10 billion) budget deficit this fiscal year and warned that a surplus might not return until 2024 as the oil price slump batters its economy.

Alberta, home to Canada's oil sands and the No. 1 exporter of crude to the United States, has been hammered by a plunge in prices to around $40 a barrel from $105 in mid-2014.

The New Democratic government, which swept to victory last May, had said it was prepared to tolerate deficits, and Finance Minister Joe Ceci reiterated it would protect public services.

"The first option is to slash and burn vital programs that Alberta families count on, and that's the wrong path," Ceci said. "Instead we will carefully maintain spending, ensuring we are spending every tax dollar wisely while helping Albertans weather this storm."

Ceci pledged to keep funding stable for health, education and social services but save C$600 million in operating expenses over the next two years through measures including a freeze on managerial salaries and merging or dissolving 26 government agencies.

The government will invest C$34 billion in a five-year infrastructure plan on projects including roads, bridges, schools, hospitals and spend C$250 million over two years to support job creators.

Alberta is also cutting the small-business income tax rate to 2 percent from 3 percent.

The province will borrow to fund its fiscal plan, with total debt hitting C$57.6 billion by 2018-19, or 15.5 percent of nominal Alberta GDP. As a result, the government will scrap legislation introduced last year to limit debt-to-GDP to 15 percent.

CARBON TAX

The budget contained further details on Alberta's carbon tax, announced in November, of C$20 a tonne in 2017, rising to C$30 a tonne in 2018.

The levy is expected to cost households C$320 a year, on average, in 2017 and C$470 a year in 2018, not including rebates offered to low and middle-income earners.

Over five years Alberta expects the carbon levy to raise C$9.6 billion, of which C$6.2 billion would be invested in green infrastructure and renewable energy projects, while the remainder would help cover consumer rebates and the small-business tax rate reduction.

($1 = 1.2844 Canadian dollars)

Reporting by Nia Williams; Editing by Steve Orlofsky

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