CALGARY -- The Alberta Government’s second-quarter fiscal update shows a slightly smaller projected deficit than presented in August, but the province is still facing down a $21.3-billion hole and has no timeline for when the budget will be balanced. 

“We’ve experienced and unprecedented drop in energy prices and, at the same time, we’re combating a pandemic within our own borders,” said Finance Minister Travis Toews.

“We will not be able to balance (the budget) in our first term and I don’t have a definitive date."

The deficit is $2.8 billion less than forecast in Alberta’s first-quarter update presented three months ago, boosted by $1.4 billion in additional transfers from the federal government and higher than expected non-renewable resource revenue. 

The projected shortfall is still $14 billion dollars higher than what was anticipated when the finance minister unveiled Budget 2020 in February. Alberta’s debt is expected to reach $97.4 billion by the end of March. 

“Although we are facing significant challenges, we are managing our expenses carefully and we remain committed to delivering programs and services in the most efficient manner possible,” said Toews.

Expenses up, revenue down

The province’s expenses increased to $62.7 billion — $5.4 billion more than outlined in Budget 2020 — mostly due to $3.5 billion in COVID-19 spending and capital grants. The government is also losing $1.25 billion in its sale of crude-by-rail contracts. 

Alberta is setting aside $750 million for COVID-19 contingency in 2021-22.

The ongoing pandemic and economic downturn continues to deliver a double-whammy to revenue as money generate from resources, income tax and gaming is down significantly. 

Revenue is forecast to total $41.4 billion, down $8.5 billion from what was expected in Budget 2020. Money generated off income taxes is anticipated to be $4.1 billion lower than forecast, with corporate income tax down $2.3 billion alone. 

Budget 2020 was built on the assumption that the price of WTI would average around $58 per barrel, contributing to non-renewable resource revenue of more than $5 billion.

Instead energy revenue is now forecast to bring in just $1.6 billion, the lowest it's been in Alberta since 1986-87. The price of WTI is now anticipated to hover around $36.40 per barrel.

What comes next?

The multi-billion dollar question, of course, is how the government plans to dig itself out of the deficit. 

“It’s another dismal budget update and this has to be a wake up call for the finance minister that it’s once again prioritize belt-tightening,” says Franco Terrazzano with the Canadian Taxpayers Federation.

“Sooner rather than later we definitely need to hear a plan from the United Conservative government about how it’s going to balance the budget, start paying down the debt and what areas of spending it’s going to reduce.”

The finance minister wouldn’t provide much detail on Tuesday, saying the big decisions will be revealed when Alberta releases its budget next year. 

But Toews rejected the idea of a Provincial Sales Tax — at least for now. 

“Our policy today on a sales tax is that we have no plans to introduce one,” Toews says. 

“To introduce a sales tax at this point of great economic challenge would be really poor economic policy.”

The provincial government’s fiscal statement provides some hints about what will be targeted when cuts are made in the next budget, specifically taking aim at the public sector. 

“While the public sector plays a key role in delivering public services, it does not creat jobs or generate wealth,” the fiscal statement reads. “Public sector activities and spending are paid by withdrawing money from the economy, through taxes, or by taking money from future taxpayers by borrowing for deficit financing.”

Toews says public sector spending will be brought in line with what other province’s spend on a per-capita basis. 

Alberta’s next budget is expected to be tabled in February.