The province provided a second-quarter update on Alberta’s economic state on Wednesday and the finance minister says we need to tighten the budget belt to see us through a drop in oil prices.
Oil prices are sliding and that affects Alberta’s fiscal planning so the province is being cautious as it plans for the rest of the year.
“We will keep the budget balanced this year through discipline and careful financial management. With lower oil prices forecast for the second half of the year, we will make the fiscally responsible decisions to keep government operating in the black while addressing infrastructure needs as Alberta continues to grow,” said Premier Jim Prentice.
“While we remain financially on track for this year, the recent and significant drop in oil prices reinforces the need to be fiscally prudent and responsible. We will protect our financial position and ensure we are delivering government services efficiently and effectively,” said Robin Campbell, President of Treasury Board and Minister of Finance.
Second-quarter results are positive and the province says we should still be in the black at the end of the fiscal year but the surplus won’t be as large as what was expected.
“Let me be clear, whether prices go up or down, this government will remain steady, on course, and committed to solid fiscal principals. We’re going to balance this year’s operating budget and carry on the work that Albertans have told us they want us to do. Deliver core programs and services, and build and maintain the infrastructure that is so important to the quality of life of our growing population,” said the Finance Minister.
The surplus was forecast to be $1.1B last March and is now set at $933M for 2014-15.
“Our forecast fiscal plan surplus is now less that what we predicted, $154M decrease from budget and $298M less in forecast in the first-quarter. This is due primarily in changes to energy revenues,” said Campbell.
The revenue forecast has been updated to $45B, which is $637M higher than originally estimated and total expense is now forecast at $44.1B, up $791M from budget time.
The province says the capital plan is providing $7.3B for infrastructure, primarily for additional school projects, and that direct borrowing for capital purposes is now forecast at $2.2B.
“We can’t budget on what the price of oil is for the particular day. We budget looking at the whole year so we’ve adjusted our energy assumptions and our forecast for the oil for 2014-15 is $88.88 US per barrel,” said Campbell.
He says that means the revenue forecast for the remainder of the fiscal year is based on $75 US per barrel.
“Sustained low prices will have an impact on our revenue so we’ll have to move cautiously and it will not be business as usual,” said Minister Campbell. “Despite the higher revenue forecast, we are committed to keeping our spending in check. We remain financially on track for this year but we need to be fiscally prudent in our planning and our projections as we go forward.”
2014-15 Second Quarter forecast ($ millions)
Full year forecast |
Budget 2014-15 |
Q2 Forecast |
Change |
|
Total Revenue Non-renewable resource revenue |
$44,354
$9,209 |
$44,991
$9,355 |
+637
+146 |
|
Total Expense |
$43,267 |
$44,058 |
+791 |
|
Surplus |
$1,087 |
$933 |
-154 |
|
|
Actual 2013-14 |
Q2 Forecast |
Change |
|
Surplus |
($302) |
$576 |
+878 |
Balance sheet |
2013-14 Year End |
2014-15 Forecast |
Change |
|
Heritage Fund and endowments |
$18,562 |
$19,013 |
+451 |
|
Contingency Account |
$4,658 |
$5,000 |
+342 |
Capital Plan |
Budget 2014-15 |
Q2 Forecast |
Change |
|
Capital Plan spending |
$6,599 |
$7,272 |
+673 |
|
Direct borrowing |
$4,883 |
$2,227 |
-2,656 |
To see the 2014 Budget, click HERE.
