CALGARY – Alberta Finance Minister Doug Horner says he wants to hear from experts at a summit this summer about how best to predict energy prices for future budgets.
“I want to bring everybody into a room and I want to say, ‘OK, here’s how we do it. You guys come up with the forecast. Tell me if this is the right thing to do or if there’s things we can do differently,'” he said Friday.
Horner made his remarks to a Calgary Chamber of Commerce luncheon a day after handing down a budget that includes $6.3 billion in red ink, mostly in borrowing for infrastructure to accommodate Alberta’s rapidly growing population.
The budget holds the line on day-to-day spending and includes no new taxes or tax hikes.
Premier Alison Redford’s Progressive Conservative government has pegged much of its current revenue shortfall on what it calls the “bitumen bubble” — a weakening in Alberta oil prices against the U.S. benchmark caused by constraints in getting the crude to the most lucrative markets.
Horner has said the effects of the bottleneck have hit provincial coffers more quickly and severely than anyone could have predicted.
The provincial budget released Thursday — which includes an operating deficit of $2 billion, plus $4.3 billion in infrastructure borrowing — is based on oilsands crude prices of US$68.21 per barrel, about three-quarters of the predicted U.S. benchmark price.
The Calgary Chamber of Commerce has suggested the Alberta government set up a provincial budget office that would look at those predictions with fresh eyes.
“Let’s find ways to create some objectivity, some credibility, to the forecasting and financial analysis that we can all agree on and then at the end of the day we can have some good numbers to make some good predictions for our revenue sources,” said chamber chief economist Ben Brunnen.
He said Thursday’s budget is, overall, good for Alberta businesses.
“Government did what they needed to do, which was demonstrate some leadership from a fiscal management perspective. They held the line on spending and they introduced binding legislation for savings and managing spending from a contingency fund perspective,” said Brunnen.
“This was a relatively pleasant surprise and it sets the stage for future prosperity.”
Also Friday, Opposition Wildrose Leader Danielle Smith told reporters that Redford is risking the long-term financial health of the province with her plan to borrow $17 billion over the next three years for infrastructure.
Smith said Redford has not presented a concrete plan on how to pay that back, and said government borrowing rules allow for a $40-billion ceiling.
“If you’ve got a plan in place now that doesn’t contemplate ever being in surplus again, and doesn’t contemplate how you’re going to pay that debt back, that suggests to me this debt is going nowhere but up,” said Smith.
Smith said Redford’s team has dug so deep a debt hole, even the fiscal hawks in her party can’t figure out a way to run a balanced budget this year.
She said the Wildrose could run one next year with a phased program of infrastructure construction, cuts to civil service managers and eliminating risky, big-ticket public-private partnerships like carbon capture and storage.
Kyle Fawcett, Alberta’s associate finance minister, said he had a look at the Wildrose numbers and called them a recipe for debilitating cuts to front-line service.
Horner said Alberta will probably go to the capital markets for its debt, mainly from Canadian financial institutions and U.S. ones to a lesser degree.
“There’s trillions of dollars that are looking for safe haven, safe homes to invest in,” he told reporters Friday.
Borrowing from the Heritage Savings Trust Fund is a less attractive option.
“We’d borrow from the Heritage Fund if the Heritage Fund wasn’t making so much money for us. They had eight per cent last year. I don’t want to pay eight per cent interest. So that’s probably not where we’re going to go at this point in time.”
NDP critic Dave Eggen said the budget has broken so many Redford promises, his party had enough for a Top 10 List.
Among the key betrayals, said Eggen, is underfunding of schools, deep cuts to post-secondary operating grants and rollbacks in some services for seniors.
“There is a direct attack in this budget on the people who actually deliver the services in health care and education,” said Eggen.
The No. 1 broken promise, he said, was Redford’s promise during the 2012 election to balance the books this year while not raising taxes or cutting services.Of those three, he said, only the tax promise was kept.
Guy Smith of the Alberta Union of Provincial Employees warned the 6.8 per cent cut to operating grants for post-secondary schools could result in labour unrest.
“I have no doubt the cutbacks will have harsh consequences for schools, students and employees,” said Smith in a news release.
Smith said there are 9,000 AUPE employees at post-secondary schools in Alberta.