Alberta posts deficit budget, agriculture included in belt tightening

EDMONTON — Increased taxes and levies, spending cuts, layoffs and borrowing from the savings account still won’t be enough to dig Alberta out of its financial hole caused by plunging oil prices.

The 2015-16 deficit is expected to be $4.99 billion, the biggest deficit in recent Alberta history.

Increased taxes on cigarettes, fuel and alcohol, a health care levy and other fees are expected to bring in an additional $1.48 billion in revenue, bringing the total expected revenue to $49 billion.

“This has been one of the hardest budgets developed in many years and it has required tough decisions. It is not the reality we were expecting as recently as last fall,” said Alberta finance minister Robin Campbell, referring to the dramatic drop in oil and gas prices that Alberta relies on for revenue.

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The government also plans to reduce spending by $3.75 billion by eliminating more than 2,000 positions and cuts across almost every ministry.

To soften the financial blow, the province plans to borrow $4 billion of the $6.5 billion stashed in the Contingency Fund and continue dipping into the fund for the next two years, by which time only $1 billion will be left in the savings account.

Campbell hopes by then Alberta will have started to wean itself off oil and gas revenues and can start adding money back into the contingency fund.

“This is the balanced approach that Albertans want and our economy needs.”

There will be no provincial sales tax, no changes in corporate income tax rates and no change to the oil and gas royalty structure, but personal income tax will increase.

“Government will not add to their burden and risk more layoffs by increasing corporate taxes or changing our royalty structure. This is not the time to be putting more pressure on businesses,” he said.

With Alberta in such a fragile financial position, Campbell said he couldn’t risk increasing corporate income taxes.

“We understand Alberta is in a vulnerable position right now and reactionary decisions could cause more harm than good.”

A new health care levy will be introduced July 1 for Albertans with incomes more than $50,000 and will top out at $200 a year.

Tobacco, alcohol and fuel taxes will increase effective midnight tonight. Fines for traffic violations will increase 35 percent.

Fuel tax will increase four cents to 13 cents per litre. The tax-exempt fuel use program and farm fuel benefit will be capped at nine cents per litre.

The personal income tax rate will increase from 10 percent to 10.5 percent and eventually reach 11.5 percent by 2018.

“We are asking those who can afford it to pay a bit more.”

Health and education will take the biggest hits. The health budget will decrease $160 million for health and 1,695 jobs will be eliminated, mostly through attrition. The education budget will increase by $145 million, but must absorb increased population and yearly cost increases.

“We’re asking departments to absorb population plus inflation growth, asking them to absorb contract negotiations and wage increases. There is going to be real pain to those decisions.”

Just over 2,000 jobs are expected to be lost over all ministries. These cuts are expected to save $200 million.

The agriculture ministry will lose 23 positions and Agricultural Financial Services Corp. will lose 17 positions. Agriculture’s operating budget is budgeted to be $931 million, a $16 million reduction.

The agriculture insurance, lending and income support program, delivered through AFSC, will be maintained. The $32 million budgeted for the Alberta Livestock and Meat Agency has been cut by $4.8 million.

It’s widely believed Alberta premier Jim Prentice will call an election within days, using this budget as the basis for his party platform.

Campbell said it is a budget he feels confident talking to Albertans.

“I think it is a pretty balanced approached. I have no issues going to the doors in my riding selling this.”