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The Canadian Press - ONLINE EDITION

Albertans brace for $2B "fiscal correction" in new provincial budget

By: Jim Macdonald, THE CANADIAN PRESS

8/02/2010 6:46 PM | Comments: 1

EDMONTON - Alberta's Conservative government will attempt to bail the province out of a record deficit Tuesday with a new tight-fisted budget.

But with the most volatile revenue flow in all of Canada, Alberta could end up being swamped by a drop in energy prices or an expected boost in the dollar.

"Absolutely," conceded Finance Minister Ted Morton on Monday as he posed with the budget documents for reporters.

"Every time the dollar goes up by a penny it costs us $225 million in lost revenues. That's why I'm going to give this budget with a sense of optimism, but also with a sense of caution."

The best example of Alberta's wild revenue swings was two years ago when projections of a record surplus in the summer became warnings of a record deficit by winter after a huge drop in oil and natural gas prices.

A year ago, Premier Ed Stelmach promised a $2 billion "fiscal correction" in this budget. Unions and public agencies have been bracing for job and program cuts.

Morton, who took over the finance portfolio in a recent cabinet shuffle, is trying to dampen some of the gloomy predictions, but he conceded that "difficult times call for difficult choices."

"Does everybody hurt a little? Yeah. But I think it's a fair budget and the cuts have been spread around. It asks everybody to give up a little, but it doesn't target any one group."

Economist Mike Percy said the government is feeling pressure to cut spending or face the prospect of an even larger deficit.

"One of the most difficult jobs in North America is being finance minister of Alberta because of the tremendous volatility of revenues," said Percy, the dean of the University of Alberta's business school.

"With natural gas, it's a $120 million swing if it's a 10-cent change in the price for the year."

Stelmach has promised to put the province "back in the black" within three years but he's given few hints as to how he'll accomplish that, other than to say there will be no tax increases.

However, the fiscal hawks in Alberta are pushing for major spending cuts to prevent the province from sinking into a sea of red ink.

The University of Calgary's School of Public Policy said a $5 billion spending cut would bring Alberta in line with other provinces.

The study group said per capita spending in Alberta is 40 per cent higher than Ontario and 30 per cent higher than British Columbia.

The Canadian Taxpayers Federation wants even deeper cuts in the range of $6.4 billion, including a five per cent spending cut across the board and cancelling expensive carbon capture projects.

"It's clear to us that unless oil and gas prices rocket up, the government could run between a $4 billion and $6.8 billion deficit," said federation spokesman Scott Hennig.

The Tories are also being pressured by a new right-wing political rival - the Wildrose Alliance.

Wildrose Leader Danielle Smith said the government could avoid deficits over the next three years by not "cramming a bunch of capital spending into the next two years."

"It doesn't make a whole lot of sense to be rushing to build hospitals and schools if you don't have the money to be able to staff them," said Smith.

On the other side of the political spectrum, the Liberals and New Democrats want the government to avoid painful job cuts and keep programs that help the poor.

"As long as Progressive Conservatives are in power, we're going to see this constant cycle of overspending followed by massive cuts," said NDP Leader Brian Mason. "It's not how Albertans want to see the province run."

Alberta Liberal Leader David Swann said he believes there are ways for the government's "bloated" spending to be brought under control without disrupting basic services for Albertans.

"These are pretty tough times for a lot of people in Alberta," said Swann. "Those who are most vulnerable need to be sure that they're going to be protected."

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1 Comments

Posted by: HI-D-Ho

February 8, 2010 at 8:34 PM

A few years ago, the premier of Alberta gave every citizen over the age of 18 years a gift of approximately $400 because there was such a huge surplus. It looks like the surplus should have been retained as a rainy day fund.