Budget based on unrealistic price of oil; MLA Hunter

Posted on March 2, 2016 by Taber Times

By Trevor Busch
Taber Times
tbusch@tabertimes.com

In light of unavoidable revenue conclusions in relation to the collapse of prices in the oil and gas sector, there was no question Alberta would be facing a significant deficit in the 2016-2017 fiscal year.

The question on most lips, in the lead up to the province’s third-quarter fiscal update last week, was how much?

Finance Minister Joe Ceci’s reluctant announcement last Wednesday will see the Notley NDP government pushing deficit billions into the double digits, posting an estimated $10.4 billion deficit for 2016-2017.

Cardston-Taber-Warner MLA Grant Hunter suggested even this staggering deficit figure might be conservative considering the province’s optimistic projections of limited price recovery in the oil and gas sector over 2016.

“I guess what the issue is, as we said, is you’re basing your price of oil way too high, and you’re telling Albertans something that Saskatchewan doesn’t believe it will be that high, the pundits don’t think it will be that high. It really sounds like they were trying to pull one over on Albertans. They’re trying to build trust, and they’re trying to convince Albertans they’re the right people to rule. You don’t do that by telling Albertans one thing, and then saying, ‘Oh, we made a mistake’. They’ve got to stop saying that. They need to be realistic, and come out with a budget that is realistic, and that can work, and doesn’t need to be upgraded or changed.”

Last fall, the province was projecting a $5.4 billion deficit for the 2016-2017 fiscal year, a figure which has now escalated dramatically due to a wholesale collapse in energy prices.

Long a key component in keeping government coffers flush in Alberta, the benchmark price for oil has contracted from a high of more than $100 per barrel in June 2014, to today’s dismal average of around $30 per barrel, leaving strained provincial finances in its wake.

According to government estimates, every $1 drop in the price of a barrel of oil translates into a $170 million loss in provincial royalty revenues.

The NDP’s targeting of labour regulations in the agricultural sector through the much-reviled Bill 6, according to Hunter, is already having unintended negative consequences for labour desperate to find work in Alberta.

“I had a situation where a guy called me up the other day, and he’d worked in the oil patch all his life, and lived on a farm in a small community. He said he’s about ready to lose his house,” said Hunter. “Yes, I got layed off from the oilpatch, but usually I could come back here and do some odd jobs on different farms, but because of Bill 6, no one wants to hire me now, because as soon as they hire one person, then the full weight of OHS and WCB comes down on them. He said I’m being hit twice here now, and not able to find work, whereas generally speaking, in the past he could find work.”

The Notley NDP have now signalled that plans to balance the budget by 2020 have been put on hold, while Ceci reiterated that cuts to front-line jobs and critical services in the public sector are now off the table. Promised infrastructure spending on roads, schools and hospitals will still be forthcoming, however.

“It speaks for itself,” said Hunter. “From the beginning, I don’t believe anyone thought the NDP were going to balance the budget — and I’m not trying to be cynical here, but the NDP in other provinces have not been very good fiscal stewards of the taxpayer’s money.”

Ceci signalled there would be no new taxes in 2016, no plans to roll out a dreaded provincial sales tax and the $19 billion Heritage Savings Trust Fund will be maintained untouched. Alberta’s provincial debt has now reached almost $19 billion, largely earmarked for infrastructure spending, and has previously been projected to reach $48 billion by the end of the decade.

As deficits begin to balloon out of control, Hunter pointed out the time is ripe to begin asking hard questions about reducing the size of government and making significant cuts to some program spending.

“I think that should have been done right from the beginning. Yes, we’ve got some deficit issues that we’re facing. Even the Wildrose was saying we’d probably have to deficit finance some of the things. I guess my point is this: we need to share the pain. It can’t just be shared by people other than public servants. Public servants have been receiving two, three, seven per cent increases to their wages during these difficult times, whereas we have hundreds of thousands of Albertans that are losing their jobs. I don’t know why there’s a double standard, and the NDP own that.”

In the third-quarter fiscal update for 2015-2016, the government expects to run a $6.3 billion deficit this fiscal year (which ends March 31) or roughly $200 million more than projected.

“First of all, we need to turn back this trend,” said Hunter. “And the trend that we’re seeing is a double standard. We’re not talking about — like the fear-mongering of the NDP — laying off thousands of nurses and teachers. That’s not what we’re talking about, because those are important sectors in our society. But what we are talking about is freezing wages. We’re talking about making sure we bring down the size of government, the civil servants in our government, and especially the management. We would bring down the size of the government to something that’s more manageable, rather than paying $24 billion in wages, we’d bring that down to a reasonable size, and we’d do that through attrition.”

In a not unexpected correlation to the state of the provincial economy, personal income tax revenues are down, housing starts and car and truck sales are dropping, and oil and gas investment is expected to shrink by 20 per cent in 2016. On the heels of the economic downturn, some Albertans are also choosing to leave the province to seek opportunity elsewhere, with government projecting an exodus of more than 6,000 over 2016, the first decline in six years.

“We haven’t changed our tune at all,” said Hunter. “It’s the same as what happened before May 5. During our election campaign we said we do believe there would probably have to be some deficits, but we would decrease the size of government so that it’s manageable and people wouldn’t have to bear that burden, and then we would look at curbing spending where we can, but we would also make sure that we continue to invest in capital projects, roads, hospitals, schools will be built. So we turn back the tide. That’s what our goal would be.”

While giving no specific dates, Ceci did indicate the 2016-2017 budget is expected to be introduced in early April.