Those of you who read the drivel I write on this site will know that it has been about 8 months since I've written anything. Well, sometimes you need a break to recharge and rebuild your arsenal of topics to write about. So, I'm back and today I'd like to delight you with some facts about how shitty Alberta's financial position is, and why you can expect it to get worse before it gets better.
This morning Alberta had it's credit rating downgraded (again) to double "A" by DBRS. Not only was the running of continuous deficits cited as a reason, but so was the complete lack of a plan to return Alberta's budget to balance. So let's look at where we are here in God's country:
In the last budget tabled by Alberta's NDP government they forecasted a $10 Billion deficit. That's just in their operations. The capital borrowing is on top of that (a sad practise held over from the Redford Tories). It gets better, though. That budget forecasted that oil would average $55/barrel throughout the fiscal year. Oil has yet to rise to $55 in the first 4 months of the fiscal year. The highest it has been is $53 and that was only for a week. Oil has spent most of this fiscal year well under $50 a barrel. For every dollar that oil averages below the government's forecast the government loses $310 million in revenue.
The NDP's forecast for oil for the next two years is $59 and $68. This is pure fantasy. Nothing in the market should lead anyone to believe that oil will rise to those levels during the next two years. There is a severe excess of supply in the market and more supply is coming on line all the time. Furthermore, there are wells in the US that aren't online and are expected to be in the next two years. No, my friends, oil is going to cheap for a long time.
That $10 Billion deficit starts to look a lot more like a $14 Billion deficit when reality sets in. Additionally, in the next two years the NDP believes that its deficits will be $9.7 Billion and $7.2 Billion respectively. That's with the expectation of rising oil prices. The NDP also plans to spend about $25 Billion on capital over the next 3 years, much of which is not included in their operational expense. $16 Billion will be borrowed.
The accumulated debt is forecast to hot $45 Billion at the end of this fiscal year. This becomes worse if they miss their revenue targets, which is a certainty. The NDP forecasts that the debt will rise to over $71 Billion by 2019-20...again, if they hit their targets (they won't).
As interest rates rise Alberta's debt servicing costs will also rise. They have budgeted for $1.7 Billion this year alone. It doesn't get better in the future.
Perhaps they believe that Alberta's economy will just grow them out of it. Again, this is fantasy. Their own economic outlook forecasts real GDP growth of 2.6% this year and 2.2% next year. Not exactly robust. Perhaps the long awaited economic diversification will finally come to Alberta. Maybe investors and businesspeople will look past the increases in taxes that have hit Alberta under the NDP. Maybe they'll choose Alberta over the about to be lower taxed US out of the goodness of their hearts.
Yet the spending announcements just keep on rolling along. But at some point the rubber hits the road, so to speak. The cuts will come. Either the NDP will do it or they will lose the election in 2019 and their successors will.
Work in education, post-secondary, health or in the public service? Brace for impact.
But that's just the way I see it.