I am not sure how this could come about. Last summer we forecast a $8.5 billion dollar surplus. The conservative government today announced a $852 million deficit including the $3billion dollar loss to the heritage fund. Lloyd figures the govt. actually had a $2.1 billion surplus because the the heritage fund is only a paper loss and will recover, if we could only bank on it. One thing for sure is if the 08-09 tally scares you, wait until the numbers for 09-10 get revealed. Iris forecast a $4.7b deficit, but when the real commodity pricing comes into play we will surely see several billion more. I think we will be in the $7 billion dollar range, in which if we borrow against the heritage fund will wipe it almost in half this year.
The problem is not the income, but rather the double digit spending increases every year. There are many large projects which could be shelved or delayed, with the carbon capture storage being one of them. The key economic driver in our province being natural gas makes matters worse being well below the $4 mark. Coupling this is the amount of people employed by the natural gas sector that are losing jobs, leaving, and closing businesses. This will also not bode well for the treasury losing tax revenues, causing either government job cuts or higher taxes. Meanwhile we lose billions due to the new royalty framework. This hits provincial coffers in a few ways:
- The amount of job losses equates to drop in tax revenue, and an increase to social assistance.
- Billions of dollars in investment dollars being placed elsewhere.
- With the commodity prices being at these lows, there are less royalties being collected now under the new royalty framework than if we were under the old regime. Not a good time to shortchange ourselves.
- Much of our newer, efficient, environmentally equipment is moving to where the utilization's for it is greater. We are being left with the, excuse the term, junk.
- When prices for our provinces main revenue stream recover, the framework takes too great a toll on producers taking them and their money off to bigger profits. This will make it almost impossible for our economy to fully recover.
It seems rather silly to take royalties into account, but the reality is how huge of a difference it makes on our province being have or have not since we are not a diversified province. I am afraid the only realistic option is to either raise taxes and institute a provincial sales tax, since government can't seem to control spending. With only enough savings for one more year like this hopefully someone in there is coming up with the master plan, otherwise dig out your wallets!