The Alberta government is forecasting a year-end surplus of $933 million based on strong oil prices in the first half of year, according to second quarter results released Wednesday.
The figure is a drop of $154 million from the $1.1 billion that was forecast in the budget.
The price of West Texas Intermediate oil – the figure the government uses – was $100.08 in the first six months of the fiscal year. The government is basing the rest of the 2014-15 fiscal year on $75 WTI.
The price of oil has already dropped below that number but Finance Minister Robin Campbell said the government had to pick a figure.
“There’s just no rhyme or reason what’s going on with the prices," he said. "We have to have a number and we think that’s a number that makes sense at the present time."
If that price persists next year, Campbell said the government would have to make "tough decisions." He said that there have been no discussions about the tax system, where Albertans pay a ten per cent flat rate, regardless of their income.
“That discussion hasn’t been had yet," Campbell said. "My focus right now is looking at efficiencies and controlling costs within government.”
When asked if he could balance the budget on $75 oil, Campbell was blunt.
“We’re going to.”
Debt for capital projects is forecasted at $11.2 billion with the cost of servicing that debt at $347 million. Direct borrowing for the 2013-2014 Capital Plan is estimated at $2.2 billion.The government is spending $719 million in total on debt-servicing costs.
Wildrose Finance Critic Rob Anderson said the government has to rein in its spending and stop borrowing to make up for low oil prices.
“The whole budget right now is out of balance. It’s based on $110 a barrel oil to balance. Can’t do that anymore," he said.
“I would call this a fiscal crisis and we need to come together to solve it as quickly as possible."
However, Anderson said that raising taxes is not the solution.
"If we tax more, my guess is that we'll just spend more."
Liberal finance critic Kent Hehr called on the government to change the way Albertans are taxed. He expressed disbelief that neither Campbell nor Prentice have discussed the issue.
"Really? Does anyone believe that?" Hehr asked. "Like c'mon. You're the finance minister. You're supposed to explore revenue-generating activities for this province."
"We're engaged in a game of inter-generational theft," Hehr added. "Where we spend all the oil wealth in one generation."
NDP MLA Brian Mason said the government needs to stop being so dependent on resource revenues. Mason said higher income earners and corporations should pay their fair share of taxes.
“All of the changes in order to get us off the oil train will come of the expense of programs that middle class and working families depend on," he said.
Government revenues are forecasted at $45 billion, an increase of $637 million. Income taxes are up $324 million from the amount forecasted in the budget.
The province’s economy continues to be buoyed by good GDP numbers (3.8 per cent growth) and strong spending in the retail sector and on new homes.