{"id":7659,"date":"2021-02-25T23:06:34","date_gmt":"2021-02-25T23:06:34","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2021\/02\/25\/alberta-faces-long-road-to-recovery-as-it-unveils-18-2-billion-budget-deficit\/"},"modified":"2021-02-25T23:06:34","modified_gmt":"2021-02-25T23:06:34","slug":"alberta-faces-long-road-to-recovery-as-it-unveils-18-2-billion-budget-deficit","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2021\/02\/25\/alberta-faces-long-road-to-recovery-as-it-unveils-18-2-billion-budget-deficit\/","title":{"rendered":"Alberta faces long road to recovery as it unveils $18.2 billion budget deficit"},"content":{"rendered":"<p> \n<\/p>\n<div id=\"\">\n<header aria-label=\"Beginning of Article\" class=\"article-header\">\n<nav aria-label=\"Breadcrumb\" class=\"breadcrumbs\">\n<h2 class=\"visually-hidden\">Breadcrumb Trail Links<\/h2>\n<ol class=\"breadcrumbs__items list-unstyled\">\n<li class=\"breadcrumbs__item\"> News <\/li>\n<li class=\"breadcrumbs__item\"> Energy <\/li>\n<li class=\"breadcrumbs__item\"> Economy <\/li>\n<li class=\"breadcrumbs__item\"> Commodities <\/li>\n<\/ol>\n<\/nav>\n<p class=\"article-subtitle\"> Alberta&#8217;s payments to service ballooning debt exceeds corporate taxes <\/p>\n<div class=\"article-meta\">\n<div class=\"published-by\">\n<p>Author of the article:<\/p>\n<p> <span class=\"published-by__author\">Geoffrey Morgan<\/span> <\/div><\/div>\n<figure class=\"featured-image\"><picture class=\"featured-image__ratio featured-image-category__commodities\"><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=564&amp;type=webp,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=1128&amp;type=webp 2x\" type=\"image\/webp\"\/><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=564&amp;type=jpg,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=1128&amp;type=jpg 2x\" type=\"image\/jpeg\"\/><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=472&amp;type=webp,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=944&amp;type=webp 2x\" type=\"image\/webp\"\/><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=472&amp;type=jpg,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=944&amp;type=jpg 2x\" type=\"image\/jpeg\"\/><source media=\"(max-width: 767px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=288&amp;type=webp,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2020\/08\/toews.jpg?quality=90&amp;strip=all&amp;w=576&amp;type=webp 2x\" type=\"image\/webp\"\/><\/picture><figcaption class=\"featured-image__caption image-caption\"><span class=\"caption\">Alberta Finance Minister Travis Toews.<\/span> <span class=\"credit\">Photo by Ian Kucerak\/Postmedia News files<\/span> <\/figcaption><\/figure>\n<\/header>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>CALGARY \u2013 Alberta Finance Minister Travis Toews said the country\u2019s largest oil-producing province would consider new sources of revenue \u201cdown the road,\u201d after the most recent oil-price collapse caused the government\u2019s debt to balloon to $115.8 billion. The deficit for this year is expected to reach $18.2 billion, a slight improvement over the $20.2 billion deficit for the fiscal year ending March 31.<\/p>\n<p>Alberta, which celebrated being debt free in 2004, has now borrowed so much money that debt-servicing costs currently exceed non-renewable resource revenues, including bitumen royalties, and corporate income taxes, which is leading to a fresh debate about whether Alberta can afford to be the only Canadian province without a sales tax.<\/p>\n<p>\u201cI believe that it would be very appropriate and important to appoint a revenue panel to test the efficiency and appropriateness of our revenue structure but right now we\u2019re focused on the job at hand,\u201d Toews told reporters during a briefing before tabling Alberta\u2019s budget for the 2021\/2022 fiscal year. He said a panel to review the province\u2019s revenue mix could be appointed in the future, after Alberta has managed the COVID-19 pandemic and an economic recovery is under way.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-1\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>\u201cRight now is not a time to even be considering major revenue adjustments or tax increases,\u201d Toews said, adding a change in the province\u2019s tax structure could affect the province\u2019s economic recovery.<\/p>\n<p>The province now pays more to service its debt than it earns in corporate income taxes \u2014 and that trend is expected to continue through the budget\u2019s forecast period to the end of 2023\/2024.<\/p>\n<p>Corporate income taxes fell to just $2.2 billion last year as oil prices plunged while debt-servicing costs rose to just under $2.4 billion after the COVID-19 pandemic and the unprecedented fall in oil prices caused a collapse in Alberta\u2019s revenues.<\/p>\n<p>Debt-servicing costs are now the fifth-most expensive provincial government expense item after healthcare, education, advanced education and social services spending.<\/p>\n<p>There are growing calls for Alberta, whose budget is highly dependent on oil and gas prices and revenues, to consider taxing consumer spending as the province\u2019s budget has deteriorated.<\/p>\n<p>\u201cPut simply, Alberta has both a revenue and an expense problem,\u201d Business Council of Alberta chief economist Mike Holden wrote in a report published earlier this month, which said a 5 per cent harmonized sales tax (HST) would raise $5 billion for the province.<\/p>\n<p>Still, the Business Council of Alberta said the province should make cuts to bring government spending in line with other provinces and that a sales tax should be considered after an economic recovery.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-2\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>The oil-and-gas-rich province\u2019s fiscal situation has deteriorated in recent years and Thursday\u2019s budget shows Alberta is expecting an $18.2-billion deficit followed by an $11-billion deficit in 2022 and an $8-billion deficit in 2023. The deficit stood at $20.2 billion last year.<\/p>\n<p>Alberta\u2019s government is budgeting under the assumption that West Texas Intermediate oil prices will average US$46 per barrel this year. Even if oil trades at an average of US$55 per barrel this year, the government will still face a massive deficit of $15 billion. The WTI benchmark closed above US$63 per barrel on Thursday.<\/p>\n<p>\u201cWhile balancing the budget remains a high priority for this government, the pandemic and resulting economic realities have significantly impacted the revenues of the province and will delay the timing of a balanced budget,\u201d Toews said.<\/p>\n<p>Toews stressed that the province\u2019s oil price estimates were conservative and that Alberta needed to rein in spending because previous governments spent beyond what record-setting oil prices could pay for.<\/p>\n<p>\u201cEven in years with $100 per barrel oil, governments in this province could not balance the budget,\u201d he said.<\/p>\n<p>\u201c(But) Albertans continue to face one of the most difficult times in our history. We\u2019re ensuring that we\u2019re resourcing our health-care response adequately to meet the pandemic challenge (and) we\u2019re positioning the economy for growth and a rebound.\u201d<\/p>\n<p>The province, which experienced the sharpest recession in Canada last year with a 7.8 per cent contraction in real GDP, will experience only a modest economic recovery of 4.8 per cent real GDP growth this year and unemployment is expected to remain high at 9.9 per cent in 2021, 8.4 per cent in 2022 and 7.3 per cent in 2023, according to Alberta government forecasts.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-3\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>By comparison, Saskatchewan and Newfoundland and Labrador, which also pull in significant\u00a0 revenues from the oil and gas industry, experienced smaller economic contractions of 4.7 per cent and 4.6 per cent last year, according to RBC Economics estimates.<\/p>\n<p>Alberta\u2019s unemployment rate will only reach pre-COVID-19 levels in 2024, when the unemployment rate is expected to average 6.3 per cent for the year.<\/p>\n<p>In an attempt to spur an economic recovery, Toews announced Thursday the province would spend $3.1 billion this year on sector strategies including a technology and innovation strategy, a tourism recovery plan, an aviation and aerospace strategy and strategies for the agriculture, pharmaceutical and energy industries.<\/p>\n<p>Spending in these areas include $20 million in virology research at the University of Calgary, $28 million to support geothermal development in the province and $449 million in spending on initiatives to reduce the province\u2019s carbon emissions.<\/p>\n<p>Last year, the Alberta government said it would spend up to $7.5 billion to partner with Calgary-based TC Energy Corp. to build the long-delayed, 830,000-barrel-per-day Keystone XL oil pipeline to the U.S. Gulf Coast. But the project permit was cancelled by U.S. President Joe Biden in January, effecting killing the project. In Thursday\u2019s budget, the government reported that its share of the pipeline\u2019s costs so far amounts to roughly $1.3 billion, comprised of a $384 million equity stake and $892 million in loan guarantees.<\/p>\n<p>Those costs could rise as the U.S. president could still order the company to dig up and remove the portion of the pipeline that crosses the Canada\/US border.<\/p>\n<p data-async=\"\"><em>\u2022 Email: gmorgan@nationalpost.com | Twitter: <a class=\"twitter-follow-button\" data-evt=\"click\" data-evt-typ=\"User Interaction Click\" data-evt-val=\"{\" control_fields=\"\" source=\"\" type=\"\" name=\"\" layout=\"\" element=\"\" feed=\"\" list=\"\" id=\"\" target=\"\" url=\"\" title=\"\" story=\"\" position=\"\" vertical=\"\" pixels=\"\" link=\"\" null=\"\" href=\"https:\/\/twitter.com\/geoffreymorgan\" rel=\"noopener nofollow\">geoffreymorgan<\/a><\/em><\/p>\n<\/section>\n<section class=\"article-content__share-group article-delimiter\" data-evt=\"beforeunload\" data-evt-typ=\"scroll-depth\" data-evt-val=\"{\" control_fields=\"\" of=\"\" page=\"\" viewed=\"\" story=\"\">\n<h2 class=\"visually-hidden\">Share this article in your social network<\/h2>\n<\/section>\n<div class=\"widget article-content__widget-group article-content__widget-group--slot1\">\n<section aria-labelledby=\"TheLogic4863289784972765151946931789611479\" class=\"feed-section feed-section--partner-story list-widget--partner-story the-logic\" data-async=\"\">\n<div class=\"widget-title widget-title--partner-story flex-align-center row row--no-padding--left row--no-padding--right\">\n<p> In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post. <\/p>\n<\/p><\/div>\n<\/section>\n<\/div>\n<div class=\"widget article-content__widget-group article-content__widget-group--slot2\">\n<section aria-labelledby=\"TopStoriesNewsletter6091923448424565286323918099368471\" class=\"newsletter-widget\" data-account-id=\"b9d3df2fccd108b5eff3c44f573b2cd6\" data-target-list=\"FP_HeadlineNews\" data-widget=\"newsletter\">\n<div class=\"newsletter-widget__body\">\n<h2 id=\"TopStoriesNewsletter6091923448424565286323918099368471\">Top Stories Newsletter<\/h2>\n<p class=\"newsletter-widget__text\">Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.<\/p>\n<div aria-hidden=\"false\" class=\"newsletter-widget__bottom js-form-main\">  <small> By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. 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