By Charlotte Morritt-Jacobs - (@morrittjacobs on Twitter) with files from Alberta News

Alberta’s Deficit Sits At $449 million higher than Projected Budget

Nov 28, 2016 | 2:18 PM

LETHBRIDGE – Alberta’s projected deficit has taken $78 million decrease since first quarter, to $10.8 billion, as reported by the government’s 2016-17 second quarter fiscal update, released Monday (Nov. 28).

The deficit is still sitting at $449 million higher than estimated at budget, due to the impact of the Fort McMurray fire and estimated $222 million in disaster assistance to the agricultural industry to deal with crop damage caused by hail and the early snow fall in October.

Finance Minister Joe Ceci stated that despite ongoing challenges and high unemployment, the province is showing some signs of stability with 25,000 jobs added in the province in the last three months.

He explained that the GDP is expected to grow thanks to increases in manufacturing shipments. The rising value of Alberta’s exports since April and the slight bounce back in drilling activity picking up from its lows.

In a statement, Minister Ceci said that while it’s too soon to say Alberta’s economy is on the right path, there are hopeful signs that it’s stabilizing and he will keep a steady hand on the tiller and sticking to the approach of controlling spending, protecting critical public services, and supporting job growth and the diversification of our economy.

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The fiscal update shows that significant risks remain for Alberta’s chief commodity in the uncertain market.

The government is maintaining the forecast oil price at US $45/bbl, the same as at first quarter, which is $3 higher than estimated at budget. The government will keep the full $700-million risk adjustment for the time being.

Despite not providing solid dates for when the provincial economy’s deficit would lift, Minister Ceci explained that the government would keep necessary programs and services in place.

With cost pressures coming from social assistances programs, operating expense increased by a net total of $556 million from budget.

To address higher caseloads for income support human services has added around $100 million and $25 million in disability programs.

Health is up by $160 million, thanks to higher utilization and the new agreement between the province and doctors. According to Ceci this number would have been around $125 million higher without the new agreement.

The province saw a dip of $37 million in education spending, related to efficiencies, and a drop in advanced education spending by around $32 million with less demand for apprenticeships and more student loans.

In a press conference Ceci stated that the government aims to keep their original projection of balancing the books by 2024, through prudence in expenditures, the diversification the economy and the investment in infrastructure.

The province saw 25,000 jobs added over the last three months, 18,000 stemmed from mining, oil and gas thanks to the modest uptick in oil drilling activity. Gains were also seen in the service sector and construction. Alberta saw a boost in manufacturing shipments and a growing value for Alberta’s exports.

Although Alberta still has the highest hourly wage rate among the provinces, the fiscal update shows job loses have dragged down total earnings from reductions in overtime, declining full-time jobs coupled with gains in part-time employment.

The province is expected to see a deeper contraction than projected with average weekly earnings predicted to fall by 2.6% in 2016. Even with forecasted growth in 2017, Albertans will see below average earnings lower than prior-recession.

As shown in the update, corporate income taxes continue to fall, and are down $700 million from the budget, due to low oil prices and slower activity across the board.

Following two years of contraction, Alberta’s economy is expected to grow by 2.3 per cent in 2017, due to wildfire reconstruction, a slight rebound in oil production and prices and investments in public-sector infrastructure.

Alberta’s debt hangs at $31.2 billion and the province is expected to borrow $14.8 billion.