Strong oil prices throughout the summer are dramatically reducing Alberta’s forecast deficit, says the province’s latest fiscal update.
Government officials on Tuesday predicted five times as much bitumen royalty to flow into provincial coffers compared to their budget forecast last February.
Bitumen royalties now make up 70 per cent of all non-renewable resource revenues in the province — which officials confirmed is the highest proportion ever.
Those non-renewable resource revenues, combined with more tax revenue, federal government transfers and investment incomes than expected, will drive down the forecast deficit this year to $5.8 billion — substantially lower than the projected $18.2 billion deficit for 2021-22.
Projected government revenue is up by almost 25 per cent, with the province forecasting nearly $58 million in revenue by year’s end in March 2022.
An unplanned $1.4 billion disaster recovery expense to help farmers besieged by drought is driving up expected costs this year to a forecast $63.7 million, according to the government’s second quarter fiscal update.
It leaves the province on track to be $101.6 billion in debt by the year’s end, which is about $9 billion less than the finance ministry initially foresaw.
The last fiscal update was released on August 30.
Athough the government expects to draw in more corporate income taxes than initially forecast, the anticipated $2.9 billion revenue this year is still below the $4.1 billion it brought in during 2019-20, before it cut the province’s corporate tax rate to eight per cent from 12 per cent.
Corporate taxes are not anticipated to rebound to 2019 levels until 2023, government forecasts show.
Still, Alberta’s finance minister insists the government’s hallmark policy on low-corporate taxes is having a positive influence.
“We are seeing billions of dollars of new investment and capital deployed in the province, and it’s happening in hydrogen, tech, aerospace, petrochemicals and many other areas,” Finance Minister Travis Toews said in a news release.
The most current fiscal update does not contain a plan to balance the budget, a core promise by the United Conservative Party during the 2019 election.
At the press conference Tuesday, Toews said the government plans to re-establish a timeline and path to balance the budget after the COVID-19 pandemic.
The update projects a $2.3-billion shortfall in 2023.
Officials could not say on Tuesday at what point Alberta would no longer be reliant on volatile oil prices to balance the budget.