EDMONTON

Province forecasts $4.7 billion deficit

ctvedmonton.ca Published Wednesday, February 10, 2010 7:12AM MST

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In an effort to increase health care funding by 44 per cent over the next five years, the government revealed plans to make cuts to more than a dozen ministries and drain the majority of the provincial sustainability fund.

The development comes with the release of the 2010/11 budget on Tuesday, which forecasts a $4.7 billion deficit - Alberta's second red year in a row.

Documents show the Tories have paid off the $812 million deficit Alberta Health Service's incurred during 2009/10 and will top up the AHS budget with another $812 million to ensure the health care system stays out of debt in the future. On top of those measures, the base operating funding will increase by six per cent for each of the next three years and 4.5 per cent for the two years after that, raising the $7.7 billion base rate from 2009/10 to $11.1 by 2014/15.

"These are difficult times and difficult times call for difficult choices," said Finance Minister Ted Morton. "Albertans have told us consistently that health care is their number one priority and it's clearly number one in this budget... We've chosen to make cuts in some areas and increase spending in others to protect essential services."

Liberal Leader David Swann calls the government's move to increase health care funding by 44 per cent over the next five years irresponsible.

"We are going to be calling for an inquiry or and audit on health care spending. This is clearly out of line," Swann said.

However, some critics are actually supporting the move.

"The government acknowledges that the bill has to be paid and so this is the beginning of that, said Friends of Medicare executive director David Eggen.

Pink slips on the way

In order to accommodate the new health care budget, 800 government positions will be eliminated throughout the year. While some jobs will be saved by cutting vacant positions and transferring employees to new departments, officials admit they are looking at laying off around 250 government workers in both union and non-union positions, with $30 million earmarked for separation packages.

Employees working in I.T. services may be hit the hardest in what officials admit is the largest job slash the province has seen since the 1990s.

"We are working hard to streamline and standardize our I.T. across government....[and] often we are able to do more work with less people," said Lloyd Snelgrove, president of the Treasury Board.

Government criticized for increased spending

Operating expenses are forecast to increase by $1.7 billion over the course of this year. The revenue forecast, on the other hand, is only expected to bring in extra $423 million.

Budget documents project the Sustainability Fund - the province's savings account - will plummet from $15 billion to $2.8 billion by 2012/13. At the end of last year's fiscal year, there was $17 billion in savings.

During the 2009/10 budget, the government outlined plans to find $2 billion in savings. On Tuesday, officials announced they managed to find $1.3 billion, but decided to reinvest that money into other departments. A fiscal conservative, newly-appointed Finance Minister Ted Morton faced tough questions about how he could approve a budget with increased spending at a time when Alberta is still swimming in red ink.

"We had a rainy day fund for a reason and we've used it," justified Morton.

Wildrose Alliance Leader Danielle Smith calls the budget "shocking".

"I think we have a major broken promise. We had heard we would keep spending in line with inflation and population growth... it was all a bunch of baloney," said Smith.

Smith claims the Tories are actually $7.5 billion in deficit if off-book debts are taken into account. Her party will release its own version of the budget at a press conference on Wednesday.

Morton defends the need to dig into savings as Alberta is up against unpredictable market factors like the price of natural gas, the instability of the U.S. economy and the high price of the Canadian dollar, saying that's exactly why the account was put into place.

"It's been raining all over the world and what happens in the rest of the world affects us here in Alberta. We've seen the bottom fall out of commodity prices; we've seen investment leave the province."

Morton anticipates the economy will improve with Alberta experiencing a projected $1.1 billion deficit in 2011/12, before returning to a modest surplus of $505 million in 2012/13.

Ministries taking cuts

Advanced Education and Technology

Budget: $3.2 billion
Cut: $205 million (2.7%)

Highlight: The government says $50 million will be saved by cutting grants to post-secondary students. Three programs - the Alberta Loan Relief Benefit, the Alberta Opportunities Bursary and the Northern Students Supplement - will be eliminated altogether.

Student loans will be increased by $38 million to compensate for some of the changes to student assistance programs.

Children and Youth Services

Budget: $1.1 billion
Cut: $36 million (3%)

Highlight: $28 million will be cut from the $382 million budget for child intervention, as the government works to shift youth from emergency housing options valued at $12,000- $14,000/mth to foster homes, valued at approximately $1,500/mth. The government says finding permanent placement options will help stabilize at-risk youth. Foster care support, however, is also taking a small cut, shaving nearly $1 million off its $163 million budget.

Housing and Urban Affairs

Budget: $490.8 million
Cut: $112 million (18.6%)

Highlight: The government says the reduction of $102 million dollars is due to the completion of a three-year funding block to municipalities. Officials say they will meet their target of adding 11,000 new affordable housing units by 2011/12.

Service Alberta