The Alberta government says the energy-focused province has bounced back from its economic malaise, and pledges the 2018 budget will deliver a reduced deficit and a concrete plan for getting to balance in five years.
The political stakes are high as Premier Rachel Notley’s NDP government takes a short pause next week from its main preoccupation – the battle to get the Trans Mountain pipeline expansion to the West Coast built – to try to convince Albertans it’s capable of slowing three years of “stimulative” spending and reining in the unwieldy provincial deficit.
With the next Alberta election pegged for early 2019, Opposition Leader Jason Kenney has made clear that he plans to assail the NDP government over its introduction of the carbon tax and higher corporate taxes, and also an annual deficit that topped
In an interview this week, Alberta Finance Minister Joe Ceci promised the budget will have an answer for critics who have said he has never detailed how exactly Alberta will get back in the black – including several pages outlining a blueprint for how deficits will be whittled down by the 2023-24 fiscal year.
“We have been focused on getting back to balance with the smaller deficit forecast for this year – I think people are starting to say ‘they’re serious about the things they’re doing.’”
Ms. Notley has already revealed the very broad strokes of this plan, saying her government will “carefully and compassionately” tighten its belt this year after keeping spending up through three years of an oil-price trough that hit the province’s finances – and its private-sector workers – hard. Government capital spending will be pared back but the NDP promises that health and social services won’t face dramatic chops.
What Mr. Ceci said was his happiest day as Finance Minister came last month, when he unveiled the fiscal update that said the province is on track for a $9.1-billion deficit when the budget year ends March 31.
However, credit-rating agencies have said Alberta continues to erode what was once its low-debt advantage through sustained deficit spending. Critics at the Fraser Institute say the pace of deficit reduction is too slow. And University of Calgary economist Ron Kneebone said the NDP government needs a concrete plan to gently ease the deficit now, so dramatic budget cuts can be avoided in the future.
The budget won’t likely stray far from the government’s main hope that new pipeline projects will be built by 2021, highlighting its wistful calculation from the fiscal update last month that the province could attract $10-billion more in investments in the next four years with greater certainty about transportation infrastructure.
Higher global oil prices in recent months have only marginally helped Alberta, which receives a discount (or differential) on its heavy oil (and natural gas, for that matter) – in part owing to pipeline bottlenecks and associated extra transportation costs. While the government has recently estimated the differential will average $14.54 per barrel of oil this year, recently the discount has widened to nearly double that.
Keystone XL and the Line 3 replacement to the United, and the Kinder Morgan expansion to the West Coast, would give Alberta needed pipeline access to the world’s best heavy oil markets – which could eventually lead to billions more in annual revenues for oil sands exports. But uncertainty about approvals, and environmental opposition – including push back from the NDP-led government in British Columbia – mean the three projects are far from certainties.
Earlier this month, Ms. Notley said her province could reduce oil and gas exports to B.C. and the rest of Canada if the project is blocked, and this week she said there will be no increases to her province’s $30-a-tonne carbon price without the Trans Mountain pipeline expansion being built. Under Ottawa’s plan, the carbon tax is set to go to $50 by 2022.