WATCH ABOVE: When Jim Prentice tabled his budget in March, his finance minister was forecasting a record $5-billion deficit. We learned today, that number was optimistic. Tom Vernon has the numbers.
EDMONTON – Alberta’s finance minister says the province is on track for a record $5.9-billion deficit this year as the oil crunch hits families and businesses.
And Joe Ceci says the worst may not be over if low oil prices persist and the province continues in recession.
“If current conditions continue, the final deficit will be in the range of $6.5 billion,” Ceci said Monday as he released first-quarter figures for the 2015-16 fiscal year which began April 1.
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Ceci said the NDP government will continue to look for efficiencies, but will not engage in large-scale layoffs or deep cuts to erase the red ink.
“We are laser focused on taking positive steps toward economic recovery.”
Opposition Wildrose finance critic Derek Fildebrandt calculated the hit to Alberta’s treasury is actually $9 billion when $3 billion drained from the contingency fund and new borrowing for capital projects are added in.
“This is the largest hit that our province has taken to its net wealth in the history of the province, and that should be concerning,” said Fildebrandt.
WATCH: Derek Fildebrandt, the Wildrose finance critic, responds to the Alberta government’s Q1 fiscal update.
Monday’s numbers are based on the budget introduced, but never passed, by former Progressive Conservative premier Jim Prentice’s government before it was defeated by Rachel Notley and the NDP in May. That budget estimated a $5-billion deficit.
The new estimates reflect changes made by the NDP, including higher corporate and personal taxes, and more than a billion dollars in new spending for health, education and social services.
READ MORE: Oil drops below $40US per barrel
Ceci is to bring in a fully revised budget after the house resumes sitting Oct. 26.
Revenue is forecast at $44.3 billion — about $1 million higher than the Prentice budget. The increase is driven mainly by higher-than-expected oil revenue in the spring, more revenue from personal and business taxes and a lower Canadian dollar.
The benchmark North American price for oil, West Texas Intermediate, was originally expected to hover around US$55 a barrel, but in the first three months instead delivered almost $58.
But the revenue figure might shrink in the next update as the WTI price dropped below $40 a barrel in August before rebounding to almost $49 on Monday.
It’s also a long way from the dizzying heights of US$100 a barrel reached in the summer of 2014.
READ MORE: Oil prices remain top priority: Alberta premier
Total government expenses are expected to be $50.2 billion, which is about $1.8 billion higher than projected in the Tory budget.
The increase is due mainly to $1.4 billion added by the NDP to health, education and social services, as well as to extra costs fighting drought and wildfires.
Debt for capital projects is at about $18 billion and the contingency fund, after the $3-billion withdrawal, will stand at $3.5 billion.
WATCH:Global’s Gary Bobrovitz reports on the emotional toll that tough economic times can take on Albertans following the release of the province’s fiscal update.
The longer term outlook is not rosy.
Real GDP is now forecast to drop by 0.6 per cent in 2015 and the number of unemployed in the province is expected to average 139,000 — up from 112,000 in 2014.
Oil and gas investment is expected to fall more than 30 per cent.
Primary household income is expected to grow by 2.5 per cent after almost eight per cent in average growth over the previous four years.
Overall retail sales have fallen 2.1 per cent so far this year. New vehicle sales have fallen by nine per cent.
WATCH: Opposition Leader Brian Jean reacts to the fiscal update on the Morning News
Alberta Party Leader Greg Clark called on the government to immediately bring in a public sector hiring and wage freeze.
Liberal Leader David Swann said the NDP needs to get going on showing Albertans a plan to manage the economic slowdown.
Saskatchewan also announced its first-quarter numbers on Monday that include a forecast $292-million deficit due to low oil prices and the cost of fighting wildfires.
Finance Minister @joececiyyc says the last month has been volatile, revenues have dipped further: Deficit could reach $6.5B. #ableg
— Tom Vernon (@TomVernonGlobal) August 31, 2015
. @Dfildebrandt says budget shortfall is really $9.1B, debt will reach $19B this year. #ableg pic.twitter广州桑拿网/fBQ8o3HZCe
— Tom Vernon (@TomVernonGlobal) August 31, 2015
With files from Global News