A $24B “fiscal reckoning” for Alberta
Albertans got a look at the province’s biggest deficit in history when the government released its financial update.
Alberta Premier Jason Kenney has been warning that the deficit in the first quarter of the fiscal year will be “well north of $20 billion” and won’t be improving any time soon.
And it was.
The 2019-20 Annual Report and 2020-21 First Quarter Fiscal Update and Economic Statement show the toll both challenges have taken on the province. The province now sits on a debt burden of $99.6 billion, or $22,400 per Albertan.
All the while Albertans have experienced losses of more than 170,000 jobs and a 13 per cent unemployment rate.
The first-quarter projections show a significant increase to the deficit reaching $24.2 billion – $16.8 billion higher than estimated in Budget 2020. Almost 70 per cent of this increase is due to a sharp decline in revenue with non-renewable resource revenue down $3.9 billion. Total revenue is estimated to be $38.4 billion, down $11.5 billion, or 23 per cent from Budget 2020.
“These numbers are incredibly sobering to all of us. If left unchecked, they predict a grim reality for Albertans. We are facing the most significant economic challenge of our generation. To deal with this challenge, our government is developing a path forward – a path of economic recovery that will see job creation, diversification and stability restored to Alberta’s finances,” says Travis Toews, president of Treasure Board and Minister of Finance.
The province has suffered a “double whammy” — a total collapse of energy prices that has “clobbered” the oil and gas industry and a global recession caused by the COVID-19 pandemic.
“Our debt will go up very significantly and in the future we will, as a province, have to deal with that,” Kenney said earlier this week. “There is a great fiscal reckoning on the horizon. We are not going to allow that to get in the way of urgent action today to protect both lives and livelihoods.”
Alberta’s 2020-21 budget, released in February before the pandemic took off, had projected a deficit of $6.8 billion.
Debt was expected to rise to almost $77 billion by next spring and to almost $88 billion by 2023. The price of West Texas Intermediate oil was expected to average US$58 a barrel.
Kenney said fiscal revenues have dropped by more than $10 billion.
He acknowledges that other provinces are suffering as well, but not to the extent that Alberta is.
“Alberta is being hit especially hard. The Conference Board of Canada projected that Alberta will have the most heavily hit economy in Canada this year, as we expected,” Kenney said. “They’re expecting an 11 per cent contraction in Alberta’s economy, the most hard hit province in the federation.”
(with files from Canadian Press)