Alberta’s new conservative government announced spending cuts and some tax increases in an effort to balance the budget by 2023 even as the oil-producing province reels from sluggish economic growth.
Just months after winning the provincial election, Jason Kenney’s government plans to cut the budget deficit to C$5.9 billion ($4.5 billion) in the fiscal year that starts in April, from C$8.7 billion in the 2019-2020 fiscal year ending in March, according to a report released Thursday. The goal is to reach a C$600 million surplus in the 2022-2023 budget.
This will come through a 2.8% reduction in operating expenditures and a 7.7% decrease in the size of the public sector workforce over four years. The indexing of some tax credits and brackets to inflation will be temporarily halted.
The budget represents Kenney’s first step toward fulfilling a campaign pledge of balancing Alberta’s books within his first term. Public debt expanded to C$63 billion after oil prices collapsed five years ago, nearly halting new oil sands development and plunging the province into recession.
Kenney had appointed a panel led by former Saskatchewan Finance Minister Janice MacKinnon to provide him with recommendations on improving Alberta’s finances. That group recommended reforming the province’s health care system to cut per capita spending in line with other provinces and reducing the portion of government funding that goes to education administration and governance.
The current fiscal year’s deficit will rise from C$6.7 billion in the previous mostly because of a C$1.5 billion provision related to the divestiture of a crude-by-rail program set up by the former government, according to the report. Kenney is currently seeking to sell the program, which involved leasing rail cars to ship out 120,000 barrels a day of crude to private companies. The program would have cost taxpayers C$1.8 billion a year, the government said in the report.
Other highlights from the budget:
- Total borrowing for the 2020-21 fiscal plan is expected to be C$39.4 billion
- Revenue will rise to about C$50 billion in 2019-2020 from C$49.6 billion the previous fiscal year, and total expenses will increase to C$58.7 billion from C$56.3 billion
- West Texas Intermediate crude is forecast to average $57 a barrel in 2019-2020 fiscal year, rising to $58 a barrel the following year
- GDP will grow by 0.6% in 2019, before expanding 2.7% in 2020
© 2019 Bloomberg L.P.