EDMONTON - Falling oil revenues and a volatile global marketplace are hammering Alberta's bottom line and may leave taxpayers with a deficit as large as $3 billion this year, Finance Minister Doug Horner announced Thursday.
Political opponents, however, said mismanagement by Premier Alison Redford's government is the true culprit.
The original projected deficit in 2012-13 budget was $886 million, but that may end up between $2.3 billion and $3 billion, Horner said as he released the first-quarter update.
Horner said financial crises in Europe, economic uncertainty in the United States, political upheaval in the Middle East and record growth in China make it difficult to peg where world oil prices will go.
"All of these things are frankly beyond our control, but they affect Alberta and they affect our bottom line," said Horner.
The government won't incur any long-term debt as the shortfall will be covered by the $6.3-billion Sustainability Fund.
Horner reported that overall revenue decreased by $400 million in the first three months of the fiscal year because of lower oil and bitumen royalties. Expenses increased by $5 million due to disaster funding.
He noted oil has recently fluctuated between about US$109 and US$77 a barrel and currently sits at about US$95.
Horner said the government is taking action to ensure it meets Redford's promise of balancing the budget by 2014.
"We are tightening our belts," he said.
He said government departments have been directed to spend less than their budgets and find other efficiencies to save at least $500 million in total.
Ministers have been asked to review their capital budgets to see where money can be saved.
"We will be reviewing every government program and service to ensure every single penny goes towards delivering programs and services that produce demonstrated results," said Horner.
"(But) we're not going to cut for the sake of cutting."
Horner also warned unions to expect a hard line in bargaining.
"There will be no new money for public-service sector negotiations until we see improvement," he said.
He wouldn't say which capital projects may be mothballed but, when asked, said the new Royal Alberta Museum project — set to break ground in downtown Edmonton — will go ahead.
On Wednesday, the government announced it was cancelling a $122-million police training college in Fort Macleod, just two months after they awarded the construction contract and just days before shovels were set to turn the earth.
The $886-million deficit figure was presented by the government in its pre-election budget in February. Redford and the Tories went on to win another majority government in April.
The budget boosted government spending by 3.3 per cent to a record $41.1 billion. Program spending went up almost seven per cent, with substantial raises for education, health, cities and money for the most vulnerable.
Opposition critics dismissed the budget as a bag of pre-election goodies, based on unattainable oil forecasts, that would be clawed back after the election.
On Thursday, Wildrose critic Kerry Towle said that, unfortunately for taxpayers, the critics were proven correct.
"This government has no plan, has no idea where they're going to cut and they're just doing it arbitrarily. They're picking from the pot and they're just taking from everyday hardworking Albertans," said Towle.
NDP critic Dave Eggen said it's difficult to fathom how a province leading the nation in economic growth, with a rising population, the lowest unemployment rate, and oil in the $90-a-barrel range can't balance the books.
"What this minister is saying this morning doesn't make any sense," said Eggen.
"We have an economy that's growing and yet the government can't manage to balance the budget or have adequate revenue to fund the programs that Albertans need."
In a news release, Liberal leader Raj Sherman call the government's spending plans a "fudget budget."
"Redford made irresponsible spending promises before the election to buy votes; she predicted overly rosy resource revenues and can’t get her spending priorities in check. It was always a recipe for a fiscal disaster.”
Scott Hennig of the Canadian Taxpayers Federation said what was not in the budget update was more telling than what it contained.
Hennig noted the update report broke sharply from past practice. The report contained few numbers and almost none of the supporting data that would allow the public to understand how the government arrived at its numbers and projections.
The government also cancelled the customary technical briefing for reporters. Such briefings allow journalists to talk off the record to department officials to better understand the minutiae and the context of the data before asking questions of the finance minister.
Horner told the news conference that such a briefing was cancelled because it would sow more confusion than clarity.
"The reality is if we have to do a technical briefing for you (reporter) folks, how do we expect that Albertans are going to understand what I am telling them?" he said.
Hennig said the lack of information should alarm taxpayers.
"This is not a budget update. This is a brochure," said Hennig.
"I've been doing this for seven years. This is the most ridiculous thing I've ever seen handed out at a quarterly budget update. They usually provide, you know, numbers and estimates going forward, not (just) a chart saying things are volatile."
Hennig said the Redford administration is starting to resemble the government of former premier Don Getty in the 1908s, when plunging oil revenues prompted then finance minister Dick Johnston to repackage, recast, and recategorize budget figures.
"When governments start hiding their numbers, be worried," he said.
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10. Oil And Gas Accounts For 4.8 Per Cent Of GDP
The oil and gas industries accounted for around $65 billion of economic activity in Canada annually in recent years, or slightly less than 5 per cent of GDP. Source: <a href="http://www.ceri.ca/docs/2010-10-05CERIOilandGasReport.pdf" target="_hplink">Canada Energy Research Institute</a>
9. Oil Exports Have Grown Tenfold Since 1980
Canada exported some 12,000 cubic metres of oil per day in 1980. By 2010, that number had grown to 112,000 cubic metres daily. Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=9&SheetID=224" target="_hplink">Canadian Association of Petroleum Producers</a>
8. Refining Didn't Grow At All As Exports Boomed
Canada refined 300,000 cubic metres daily in 1980; in 2010, that number was slightly down, to 291,000, even though exports of oil had grown tenfold in that time. Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=7&SheetID=104" target="_hplink">Canadian Association of Petroleum Producers</a>
7. 97 Per Cent Of Oil Exports Go To The U.S.
Despite talk by the federal government that it wants to open Asian markets to Canadian oil, the vast majority of exports still go to the United States -- 97 per cent as of 2009. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>
6. Canada Has World's 2nd-Largest Proven Oil Reserves
Canada's proven reserves of 175 billion barrels of oil -- the vast majority of it trapped in the oil sands -- is the second-largest oil stash in the world, after Saudi Arabia's 267 billion. Source: <a href="http://www.ogj.com/index.html" target="_hplink">Oil & Gas Journal</a>
5. Two-Thirds Of Oil Sands Bitumen Goes To U.S.
One-third of Canada's oil sands bitumen stays in the country, and is refined into gasoline, heating oil and diesel. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>
4. Alberta Is Two-Thirds Of The Industry
Despite its reputation as the undisputed centre of Canada's oil industry, Alberta accounts for only two-thirds of energy production. British Columbia and Saskatchewan are the second and third-largest producers. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>
3. Alberta Will Reap $1.2 Trillion From Oil Sands
Alberta' government <a href="http://www.huffingtonpost.ca/2012/03/27/alberta-oil-sands-royalties-ceri_n_1382640.html" target="_hplink">will reap $1.2 trillion in royalties from the oil sands over the next 35 years</a>, according to the Canadian Energy Research Institute.
2. Canadian Oil Consumption Has Stayed Flat
Thanks to improvements in energy efficiency, and a weakening of the country's manufacturing base, oil consumption in Canada has had virtually no net change in 30 years. Consumption went from 287,000 cubic metres daily in 1980 to 260,000 cubic metres daily in 2010. Source: Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=6&SheetID=99" target="_hplink">Canadian Association of Petroleum Producers</a>
1. 250,000 Jobs.. Plus Many More?
The National Energy Board says oil and gas employs 257,000 people in Canada, not including gas station employees. And the Canadian Association of Petroleum Producers says the oil sands alone <a href="http://www.capp.ca/aboutUs/mediaCentre/NewsReleases/Pages/OilsandsaCanadianjobcreator.aspx" target="_hplink">will grow from 75,000 jobs to 905,000 jobs by 2035</a> -- assuming, of course, the price of oil holds up.