Finance minister warns of looming $10-billion deficit budget

The provincial government is expecting to table a $10.4 billion deficit budget in April, though Finance Minister Joe Ceci wouldn’t go far as saying the number out loud.

'This is the steepest and most prolonged slide in oil revenues in recent history,' Joe Ceci says

Joe Ceci gives his latest fiscal update

7 years ago
Duration 1:09
In the provincial quarterly update, the finance minister called a potential $10-billion deficit "a hell of a lot of money."

The provincial government expects to table a budget in April with a $10.4-billion deficit, but when Finance Minister Joe Ceci briefed the media Wednesday, he refused to say that number out loud.

"It's potentially $5 billion more than we expected," Ceci said during his latest fiscal update at legislature.

When pressed repeatedly for the total projected deficit for 2016/17, he replied, "It's a lot. It's a hell of a lot of money."

If the deficit does run as high as $10 billion, it would be the largest in the province's history.

Ceci blamed the deficit on falling oil prices, which have staggered the economy.

"This is the steepest and most prolonged slide in oil revenues in recent history," he said.

Projections for a speedy recovery have been proved wrong, Ceci said, and it take well beyond 2020 for the government to balance the budget, as the province initially projected in October.

No layoffs, no new taxes 

Ceci said he expects the economy will continue to slide in 2016, and will see slight growth in 2017.

The government will not react to the fiscal reality with layoffs or "knee-jerk cuts," he said.

Once again, he shot down the idea of new taxes, including a provincial sales tax, and said the government is working to stimulate the economy with infrastructure spending and has frozen hiring.

Joseph Doucet, dean of the University of Alberta School of Business, said the government may want to reconsider its stance on PST in light of the projected deficit and slumping commodity prices.

"A sales tax would allow the government to have a smooth source of revenue that would protect government revenues a bit from the significant swings that we see when energy prices go up and down," Doucet said.

He said the government is right to continue to invest in priority sectors such as health and education, but said if the downturn goes on long enough the province may have no choice but to cut programs.

"I'll say I'm glad I'm not the finance minister, because it's not an easy place to be," he said.

Ceci said he will reveal more details about the province's fiscal plan when he tables the budget. He would not confirm the exact date, but said he expects it will be in the first two weeks of April.

Deficit currently at $6.3 billion

The province's bottom line has already taken a serious hit from falling commodity prices and the spin-off effects on the economy.

The government's third-quarter fiscal update revealed the deficit has grown to $6.3 billion, an increase of $197 million since October. That increase would have been higher had it not been offset by a cash injection from the federal government of $251 million.

The province received the federal stabilization funds on Wednesday morning.

While oil revenues fell by $294 million in the last quarter, a major slump in personal income taxes poses an even greater challenge for the government. Lower earnings and falling employment cost the province $762 million in lost revenue.

"That's not surprising," said Doucet  "Job losses and pressure on the labour market leads to people making less in terms of their salaries, and thus has an impact on income tax."

In its last fiscal update, the government projected that employment would grow by 0.5 per cent in 2016, but is now forecasting a drop of 1.5 per cent.

Increased school enrolment and physician compensation have also driven up the government's operating costs since October.

Meanwhile, ministries have maintained or reined in spending nearly across the board, with the exception of health, which funded a $147 million increase from its reserves.

Prasad Panda, the Wildrose critic for economic development and trade, said the government must find more operating savings to combat the ballooning deficit.

"The Wildrose has always been saying Alberta has a spending problem, not a revenue problem," Panda said.

He said action is needed before the province takes another hit to its credit rating, which will send a serious message to investors that Alberta is no longer business friendly.

The last time the government saw two consecutive years of economic decline was in 1982 and 1983, when the national energy program was running and oil prices began to crash to a record low. 


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