The Alberta government’s finances are deep in red ink — but not quite as much of it as bean counters predicted a few months ago.
In year-end financial statements for 2020-21 released Wednesday, the province posted a $17-billion deficit — about double what the budget predicted, but $3 billion lower than a winter forecast.
With his promise to balance Alberta’s books derailed by the COVID-19 pandemic, Finance Minister Travis Toews said his government will have a plan to eliminate future deficits by the time he introduces the 2022 budget, likely next February.
Toews said the rebound of oil and gas, record oilsands production, and an influx of venture capital investment in Alberta’s tech sector leave him hopeful that the worst of the hemorrhaging is over.
“I am quite optimistic about the last half of 2021, but at this point in time, given all the uncertainty, I’m not making any predictions,” Toews said at a news conference.
Pandemic spending and aid programs, costing about $5.5 billion, hammered government coffers.
On the upside, fourth-quarter improvement in oil revenues and corporate and personal income taxes meant revenue took a slightly smaller hit than anticipated. The province also relied on $1.4 billion more from the federal government than initially expected.
Alberta’s debt continued to climb, hitting $93 billion, which is $19 billion higher than it was in March 2020.
Costs mount for crude-by-rail deals
The government also released its 2020-21 financial statements Wednesday, including new information about provincial investments that have gone awry.
The province has recouped $106 million of its investment in the now-cancelled Keystone XL pipeline project from Hardisty, Alta., to Nebraska. The government has previously said it lost about $1.3 billion on a deal with TC Energy and is examining legal options to reclaim some of that money.
The bill for ongoing crude-by-rail contracts has now hit $2.3 billion, as the global economic downturn stalled the government’s plans to sell off the contracts to the private sector.
The former NDP government snapped up 120,000 barrels per day of rail capacity when stalled pipeline approvals led to a glut of oil unable to move out of the province. Toews said the government is still in possession of more than half of that capacity and is waiting until prices improve to strike more favourable deals.
The province also spent less than budgeted on K-12 education and social services. Finance ministry officials said this was because schools had lower operating costs during the pandemic. School buildings were shuttered to all students for three months in 2020 and classes shifted online.
Some Albertans who relied on provincial social assistance programs qualified for temporary federal programs during the pandemic, lowering Alberta’s caseloads.
The Opposition NDP said the government’s under-spending on social supports is galling and illogical.
“We are wondering why so many resources were withheld by the UCP government during the hardest year that we’ve ever seen on kids, families, teachers and school staff,” NDP finance critic Shannon Phillips said at a news conference.
The government’s financial records show a “litany of misplaced priorities,” including decisions that benefited the wealthy and failed to care for Albertans during the pandemic, she said.
The government’s move to slash the province’s corporate tax rate to eight per cent from 12 per cent in less than two years has frequently raised the ire of the NDP.
Phillips said the province is giving up billions of dollars that could be spent on public services. If the NDP were to form government again, she said, it would look at reversing that cut.
Even with the rate cuts, the finance ministry initially predicted more corporate income tax would flow in last year. Instead, it collected about $3 billion, which was two-thirds of its goal.
Toews is adamant his government is on the right track.
“We’ve been doing all we can to position this province for economic recovery and growth,” he said.
News source- CBC