CALGARY - It appears Alberta's sea of red ink is going to get even deeper before the current signs of economic improvement will have a buoyant effect on the province's economy.
Alberta was awash in oil revenues and the envy of the nation with a 15-year string of surplus budgets that had helped the pay off $25 billion in debt accumulated in the 1980s and early 90s. But the province has been rocked by the double whammy of a recession and falling energy prices and the debt is piling up again.
Ed Stelmach's Progressive Conservative government had already projected a record $4.7 billion shortfall when it unveiled its budget in April and a Finance Department official disclosed in late June the number was closing in on $7 billion.
The first quarter financial update is scheduled for next month.
"More than likely it will be higher but we'll have the first quarter report, I believe, at the end of August and that will give a better picture of the first four months," conceded the premier.
"Remember last year? The first quarter report was showing a small surplus - we got to the second quarter with $145 (a) barrel oil and everyone's saying - oh boy how we gonna spend all that money? Well, by the end of the year it was down to $35."
There are some "green shoots" of improvement, said Stelmach including renewed investment in the oilsands and with agricultural commodity prices. But resource revenue is still a problem.
"We do have very, very low gas prices. Gas in storage is at abnormally high levels and so that's going to take away from the revenue stream to the province," he explained.
"We also have to remember that a province does not recover its revenue stream until at least a year after the private sector does better."
The Canadian Taxpayers Federation said the deficit is spiralling out of control and shouldn't be seen as a big surprise.
"Even here in B.C. the government started out by saying it was only going to be roughly a $500 million deficit and now they're saying its going to be much bigger. It's no surprise that Alberta is saying the same thing," said Maureen Bader, the B.C. director for the Canadian Taxpayers Federation.
"The recession is probably deeper than what they were first imagining and until natural gas prices recover government revenues aren't going to recover. But ultimately at the end of the day the deficit is caused by out-of-control spending."
Last week Bank of Canada governor Mark Carney said Canada's economy will begin growing this summer after nine months of stagnation but a number of economists warn the recession isn't over yet.
Alberta has set aside roughly $17 billion in a couple of savings accounts besides the Alberta Heritage Savings Trust Fund, and the money will be used to cover some of the cash shortfalls.
"The sustainability fund which they are so dependant on which is not supposed to be used for these kind of issues is going to be gone," said Alberta Liberal Leader David Swann. "It's there for emergencies but it will be all used up by the end of the year at this rate and it's only July."
"We're talking a $10 billion (deficit) certainly by the end of the year and that's a staggering mismanagement of a resource. It's really mind-boggling."
Stelmach intends to focus on the current economic climate in Canada and how to best position Canada for a strong recovery when he meets with his fellow premiers at next week's Council of the Federation meetings in Regina.
"One is ensuring that across Canada we work together as provinces to keep rebuilding the economy," he said. "That will be done through pursuing further trade barrier removals, working to see how we can improve transportation infrastructure and the other part is expanding our markets."
The Alberta premier also intends to encourage his counterparts about the importance of keeping good relations with Canada's southern neighbours and seeking out their views on climate change negotiations in advance of December's meeting in Copenhagen.
"We just want to be very careful that we're not boy scouts leading here and finding that our best trading partner may have a different plan or approach to climate change," he said.
