Alberta's deficit history: A look at past and future numbers

Round numbers tend to garner attentionwhether or notthey are actually meaningful and Alberta is facing two particularly grim figures in its next fiscal year: 10and zero.

The province's deficit is expected to surpass $10 billion in 2016-17,while its net financial position is expected to plunge below zero and into negative territory for the first time since 1999.

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Politicallythose are tough numbers and, indeed, Finance Minister Joe Cecirefrained from actually using thephrase "$10 billion" when providing a fiscal update to reporters this week,although he eventually did utter the wordsin a CBC radio interview.

Next year's deficit will also drag the province's net financial position into the red, with total liabilities exceeding assets, just like every other province.

Butthat doesn't particularlyperturbUniversity of Calgary economist Trevor Tombe.

"There's no economic reason why a small positive net financial position, like we're in today, going into a small negative one, like we're likely to see at this time next year, would be a big concern," he said.

Even when it dips into negativeterritory, Tombe saidAlberta's financialposition will remaintheenvy of the country, asother provinces continue to carry far greater borrowing burdens, by comparison.

British Columbia's net debt stands atabout 17 per cent of its GDP, while Ontario's hovers around 40 per cent and Quebec's at a staggering 50 per cent, according to a recent RBC Economics report.

"Alberta is in a really strong position to absorb this negative shock that it's seeing," Tombesaid."Its borrowing capacity is just enormous because of the good financial position it's in."

The real issue, he noted,is what happens to the province's finances over the next several years.

"The concern is not about the $10 billionthe concern is about the expected path of future deficits," he said.

"We wouldn't want to squander that position and run large deficits for the next decade and then wind up in a similar position to Ontario."

Deficit slaying then and now

If Alberta indeed runs a$10.4-billion deficit in the next fiscal year, Tombe said that would amount to roughly 3.3 per cent of the province's GDP.

In relative terms, that would be the worst since 1992/93, when the deficit stood at 4.3 per cent of GDP.

That was also the year that Ralph Klein became premier, promising at the time to return Alberta's books to black within four, maybe five years.

Ralph Klein January 1993

9 years ago

Duration 2:27

Ralph Klein gives his first major speech a month after becoming premier. Facing an imminent election, he charts the path he wants Alberta to take to eliminate its deficits and eventually pay down its debt.

As it turned out, Klein only needed two.Alberta posted a surplus of about $900 million in 1994/95.

That was largely accomplished by a nearly20-per-cent reduction in program spending, coupled with a 55-per-cent jump innon-renewable resource revenue over those two years.

The current governmentis facing the opposite trajectory in oil prices.

Alberta collected $9.6billion in non-renewable resource revenue in 2013/14.In the current fiscal year, the haul isexpected to fall to $2.5billion.

That's a 74-per-cent decline over two years.

"Unless oil prices come back, we're going to be looking at perpetually large deficits in Alberta," Tombe said, adding the government needs to figure out"some sort of credible plan" to address the situation.

"So, not a knee-jerk, sudden cut or tax increase,but a gradual,responsible move out of deficiteven if oil prices don't rise."

For further context and comparison, this interactive graph shows provincial budget deficits and surpluses since 1981: