EDMONTON – Alberta is back in the black when it comes to day-to-day spending, but the good times are being underwritten with billions of dollars in debt, which is now at $14 billion and rising.
The province will run a consolidated surplus of $1.1 billion, the first surplus in six years, in the 2014-15 fiscal year, Finance Minister Doug Horner said Thursday.
There will be no new taxes and no tax increases, and Alberta will retain its status as Canada’s only province without a sales tax.
There is money for 40 more Mounties, 50 news schools and 2,000 new spaces for post-secondary students.
And there is cash to complete twinning of the overburdened and dangerous highway to the oilsands hub of Fort McMurray.
Horner said the province is also earmarking $1.1 billion over the next three years to help Calgary and southern Alberta recover from last year’s extensive flooding.
But Alberta is projected to rack up $14.5 billion in debt this year and $21 billion by 2017 — most of it for roads, schools and hospitals for the tens of thousands of newcomers arriving each year.
Horner said it doesn’t make sense to dip into Alberta’s savings accounts — pegged to reach $24 billion this year — when they’re making an 11 per cent return on investment while borrowing costs are less than four per cent.
“This is the right financial plan for the current situation, with interest rates at 50-year lows,” Horner said before delivering the budget speech in the legislature.
“If we don’t do this, then you stymie the growth in your economy.”
But all three opposition parties said the budget is evidence the Tories are grossly mismanaging the economy, noting that the previous debt ceiling of $17 billion has now gone up.
Wildrose Leader Danielle Smith said finance charges on the debt will be crippling by 2017.
“This government has now locked us into spending at least $820 million in finance charges for the next 30 years. That is money that’s just wasted, flushed down the drain,” said Smith.
Liberal Leader Raj Sherman and NDP Leader Brian Mason said despite a better bottom line, the Tories have not restored cuts to programs and services made in last year’s spending document.
“How is it possible in such a wealthy place, we’re going into debt and we’re cutting public services?” asked Sherman.
Mason noted that even with increases in this year’s budget, only two-thirds of last year’s $147-million cut to post-secondary school operating budgets has been restored, leaving the burden to fall on students and their families.
“It’s austerity for us, and for corporate sponsors of this government and this government itself,” said Mason. “They’ll be continuing to live high off the hog.”
Alberta has been running deficit budgets since the global economy tanked in 2008, taking oil prices with it. It avoided long-term debt for a time by draining $17 billion from its short-term savings account.
Horner is crediting this year’s surplus to rebounding oil and natural gas prices and to a lower Canadian dollar, which helps Alberta’s export-based economy.
Non-renewable resource revenue is forecast at $9.2 billion, almost seven per cent higher than last year.
The budget estimates the benchmark West Texas Intermediate price for oil will average US$95.22 a barrel this fiscal year and the Canadian dollar will be average US$0.91. Oil was trading at US$101.56 Thursday afternoon and a dollar was worth about US$0.91.
Total revenue is forecast at $44.4 billion and total operational expenses at $38.5 billion. Spending is up by 3.7 per cent over last year.
The rainy-day savings contingency fund is earning money again and is expected to reach its maximum $5 billion in 2015.
When the long-term Heritage Savings Trust Fund is included, total government savings are expected to be $24 billion this year and $26 billion by 2017.
Total tax revenue is forecast to be $21.1 billion, five per cent higher than last year due to population and economic growth. Alberta’s population recently surpassed four million people.
On the spending side, $1 billion more will go to health, education, post-secondary education and social programs.
Cities are to get $150 million more over the next three years to pay for roads and recreation centres as they see fit. They are currently getting $846 million a year.
The education budget is going up to $6.7 billion to accommodate an extra 18,000 students.
Horner’s opponents maintained that the government’s number crunching is jiggery-pokery and that the capital debt needs to be factored into the day-to-day bottom line.
All three said that by their math, Alberta is running a deficit this year. The NDP says it’s a $1.1-billion shortfall, the Wildrose estimates it at $3 billion and the Liberals at $3.9 billion.
The watchdog Canadian Taxpayers Federation estimates it is $4.9 billion.
Horner has argued that the opposition math is off kilter.
He likened the government borrowing to investing in an asset, such as a mortgage, which should not be included in day-to-day expenses.
Derek Fildebrandt of the Canadian Taxpayers Federation said he wishes the government’s debt was like a mortgage.
“When you have a mortgage, your mortgage gets smaller every year,” said Fildebrandt.
“The government’s plan is to take that debt and make it larger every year.”