Finance Minister Joe Oliver delivered a federal budget that boasted a narrow $1.4-billion surplus for 2015-16, scoring a politically critical goal just six months before a scheduled election in October.
The toughest stretch of Oliver's quest to guide the books back into the black began in November, around the time he rolled out a fiscal update that projected a meagre $1.9-billion surplus — slimmed down due to sliding crude prices. The surplus estimate shrunk to $1.6 billion days later following an infrastructure announcement.
That was right before oil prices fell off the cliff. The collapse forced Oliver to postpone the budget so he could assess the impact of the oil-price volatility.
To arrive at a surplus Tuesday, Oliver had to take the unusual step of draining $2 billion out of the budget's $3-billion rainy-day reserve, a cushion designed for unforeseeable events like natural disasters.
That adjustment was combined with several additional big-ticket changes since oil started its swing from about US$81 a barrel in November, to under US$50 mid-winter, before climbing back up to about US$55. The decline is expected to indirectly starve the government of billions in revenues.
Since November, another $1 billion was applied to the bottom line from the sale earlier this month of the government's remaining stake in General Motors, which generated a total net gain of $2.1 billion.
The budget also projected an additional $900-million net increase in revenue for 2015-16 based on changes the government hopes to make to public-sector disability and sick leave plans — even though negotiations are still ongoing. The finance minister said this element was "in accordance with federal accounting principles."
Oliver's blueprint Tuesday also predicted the government's bottom line will receive an extra $3 billion, thanks to the lower interest rates.
On top of that, the government received a $3.4-billion boost thanks to a surplus in the employment insurance account created by the buildup of premiums.
But of the changes, Oliver faced the most questions about his decision to reduce the contingency reserve — a bookkeeping manoeuvre that ultimately enabled him to balance the budget.
Oliver was asked during a news a conference why his budget chewed into the emergency cushion even as it warned of global economic threats.
He argued such a big reserve was no longer needed because the government had balanced the books.
"In the past, we haven't had a surplus and we've blown through the contingency," Oliver said when a reporter noted the government wouldn't have a surplus without using $2 billion from the rainy-day reserve.
"This year, we're forecasting a surplus and a contingency.
"Now, you can put the two together if you want or you can keep them separate, but at the end of the day that's the cushion we have for the unexpected and the unavoidable."
Oliver, who had hinted the contingency reserve could be in play ahead of the budget, also justified the move by saying the worst of the oil slump has passed and prices have stabilized, thus reducing the risk of another collapse.
He noted how prices had fallen more than 50 per cent since last summer's high of about US$107.
Oliver's challenge to keep the all-important Conservative promise to achieve budgetary balance was a daunting one, said TD Bank senior economist Randall Bartlett.
Bartlett noted how lower-priced oil contributed to the big hit Canada is expected to absorb in terms of revenues over the coming years.
The budget projected revenues to drop by $6 billion in 2015-16, $7.1 billion in 2016-17 and about $6.5 billion annually between 2017-18 and 2019-20.
"They met their commitment — (the budget) is not necessarily based on strong fundamentals, but they were hit with this quite significant (oil) shock," Bartlett said.
"I think it's a tough planning environment at this point, so they had to do something to keep the ship from the shoals."
NDP Leader Tom Mulcair said the government's use of the contingency reserve to balance the budget was "a bit of economic sleight of hand."
It's an emergency fund, he said.
"It's not something you tap into on budget day because you're missing a couple of billion dollars."
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