Travis Toews, President of Treasury Board and Minister of Finance (Government of Alberta)

By Justin Goulet

Province projects $21.3 billion deficit for 2020-2021 in mid-year fiscal update

Nov 25, 2020 | 7:51 AM

EDMONTON, AB – According to the provincial government, the 2020-2021 deficit won’t be as bad as projected earlier this year. However, the financial outlook still isn’t great.

The mid-year update shows a projected deficit of $21.3 billion, which is $2.8-billion less than the last quarter’s estimate of $24.2 billion.

The government says this is largely due to improving revenue and efforts to “hold the line on spending”.

Expenses not including COVID-19 measures have decreased $156 million from Budget 2020. Total expense is forecast at $62.7 billion, which is up from $135 million last quarter and $5.4 billion from Budget 2020.

The province explained that the added spending is for health care, personal protective equipment (PPE), municipal grants, financial supports to Albertans and businesses affected by COVID-19, and stimulus initiatives detailed in Alberta’s Recovery Plan. The plan can be viewed here.

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The government noted that taxpayer-supported debt is forecast to be $97.4 billion by the end of the fiscal year and the revenue forecast is almost $3 billion higher than the last quarter, at $41.4 billion.

The province says that increase is due to forecasts for non-renewable resource revenue, gaming revenue, investment income and transfers from the federal government.

Alberta’s real GDP is anticipated to contract 8.1 percent rather than the 8.8 percent reported in August. Real GDP is expected to fully recover to 2014 levels in 2023.

President of the Treasury Board and Minister of Finance, Travis Toews, noted employment has seen a rebound this year, recovering more than 258,000 of the 360,900 jobs lost between February and April.

“The unemployment rate has fallen steadily from the highs it hit this spring. However, the labour market still has a long way to go to reach full recovery and is not expected to surpass 2019 levels until 2022,” Toews said.

He said the pandemic has hit the province hard, but there are still “signs of hope” in the economy going forward.

“This year, Calgary has seen record levels of venture capital attraction. By the end of August, Calgary saw over $200 million of venture capital, an increase of $64 million over the previous year, with four months remaining.”

MOVING FORWARD

In the legislature Tuesday afternoon, November 24, Toews tabled an appropriation bill to make sure the health care system is “adequately resourced” and economic recovery initiatives have the required funding.

“The bill requests a total of 5.7 billion [dollars] in supplementary supply,” he said.

“Rest assured, the government continues to be focused on responsible fiscal management and fiscal prudence.”

Toews noted the province plans to introduce a “comprehensive plan” to reduce the resulting deficit.

“To start, I’m introducing three new fiscal anchors. These anchors will inform and guide government decisions and ensure we’re best positioned for fiscal recovery,” he explained, adding the first anchor will bring Alberta’s spending in line with the other provinces.

“In its report, the Mackinnon panel concluded that Alberta spends more per capita than comparable provinces, without achieving better outcomes. We began taking steps toward bringing spending down in 2019 and outside of our pandemic response, we’ve made good progress, but there’s more to do.”

The second anchor will see the government take measures to keep debt manageable by keeping Alberta’s net debt to GDP ratio below 30 percent.

“GDP is a measure of a jurisdiction’s economic output and it’s a strong correlation to a jurisdiction’s own ability to generate revenues. The ration indicates a government’s ability to repay its current debt. The higher the ration, the greater the burden on government to repay,” Toews said.

He added that the third anchor focuses on balancing the provincial budget.

“Once we can see our way clear of the pandemic, we will present a timeline for balancing the budget,” he said.

Toews will be hosting telephone town halls beginning next week, and Albertans can share their thoughts on the provincial budget via a survey available through the government’s website. The survey is open until December 4.