Alberta fiscal update touts improved deficit, revenues, but also long recovery road ahead
EDMONTON -- The Alberta government is forecasting better than expected immediate deficit and revenue situations while still pointing towards a long road to economic recovery amid the ongoing COVID-19 pandemic and rising debt load.
The forecasts were part of the province's mid-year fiscal update released on Tuesday and include the first formal government acknowledgement that it won't be able to balance the budget.
"As we continue to face the challenge of the COVID-19 pandemic, we will continue to do everything we can to protect our burdens, while also managing our finances responsibly," said Finance Minister Travis Toews.
"We're seeing some hopeful signs that recovery is starting ... but it will take some time to get to where we were in 2019."
The government's main projections included:
- A deficit of $21.3 billion for 2020-21, $2.8 billion lower than in the first quarter fiscal update
- Revenues of $41.4 billion, close to $3 billion higher than in the first quarter fiscal update
- An 8.1 per cent contraction in real GDP rather than the 8.8 per cent previously estimated
- Recovery of real GDP to 2014 levels by 2023
Toews cited improved forecasts for non-renewable resource revenue, gaming revenue, investment income, and greater federal transfers for the updated revenue forecast.
However, that rosier than anticipated forecast is still $8.6 billion short of the 2020 budget's projections.
As outlined by Toews, the province will now focus on three fiscal anchors:
- Bringing spending in line with other provinces
- Keeping Alberta's net debt to GDP ratio below 30 per cent
- Developing a plan to balance the budget once the pandemic passes
"Reluctantly, but necessarily, we will have to delay balancing the budget," said Toews. "Until we can actually see your way clear of that pandemic and start to get additional economic certainty, I think it would be disingenuous to provide a date," he said of when the books would be balanced again.
According to the update, the province's taxpayer-supported debt will hit $97.4 billion by the end of 2020-21, climbing to $125 billion by 2022-23.
The 2020 budget had planned to balance the provincial books by 2022-23.
Shannon Phillips, the Opposition's finance critic, said the government's plan lacks details on what it will do to get Alberta out of its economic slump.
"We don't see anything that shows that the government will keep us safe andt eh economy moving and get us ready."
$5.7B APPROPRIATION BILL
Tuesday's update also included news that the government was introducing an appropriation bill requesting $5.7 billion from the province's general revenue fund.
The government says the money will go towards health care funding, municipal supports, and capital grants and investments for infrastructure projects.
Toews also told reporters the province had "no plans" to introduce a provincial sales tax, but acknowledged the need to examine the province's revenues "down the road."
"To introduce the sales tax at this point of the great economic challenge would be really poor economic policy," Toews said.
"It would make sense to appoint a revenue panel similar to the MacKinnon panel to consider the appropriateness and efficiency of government revenues."
Total tax revenue for 2020-21 is forecast to be down $2.9 billion from last year, with "a severe decline" in corporate income tax revenue, and to a lesser extent, personal income tax revenue, being cited for the decline.
Provincial revenues decreased across the board with personal income tax ($1.8 billion) and bitumen royalty ($2.3 billion) being the next biggest laggards from prior budget projections.
The update lists the only area of revenue growth as a $2.2 billion in transfers from the federal government.
Provincial expenses are $5.4 billion more than initially budgeted for, up to $62.7 billion.
A new provincial budget is scheduled to be tabled in February.