The Alberta government will have to make some "very difficult choices" because falling oil revenues have taken billions out of provincial coffers, Premier Alison Redford said in a televised address Thursday.
However, she said that her government isn't planning to "take the easy way out" by raising taxes and would instead hold the line on spending and find new markets for Alberta oil.
"Some programs and services will change, especially those that are not sustainable over the long term," she said in an eight-minute pre-recorded speech.
"Quite simply, we have to put Alberta's finances on more stable footing. A province as prosperous as Alberta should not be as susceptible as we are to swings in the price of oil and gas."
Stupid me. I thought that oil revenue was eternal and could prop up any budget put forth by any Alberta Conservative till the heat death of the universe. According to some Albertans, the money would never dry up, Calgary was the new New York, and soon we'd all be licking their shiny cowboy boots. So, either oil is a commodity that can fluctuate in price, thus making income unstable, or, Alberta forgot to save some of that tidal wave of revenue for a rainy day, or the tidal wave wasn't so big after all, or the streets are paved with gold and every child has an IPad. At least one of those things is bound to be wrong.
How much is Alberta collecting?
Bitumen royalties accounted for 10 per cent of total Alberta government revenues in 2010-2011 (according to the most recent Alberta budget), a number expected to climb to about 20 per cent, or $9.9-billion, by 2014-2015. These may sound like big numbers, but on a per barrel basis, the story is different - the province collected just $6.67/bbl in bitumen royalties in the past fiscal year, and expects to collect $11.31/bbl in 2014-2015.
According to Canadian Taxpayers Federation Alberta director Derek Fildebrand, Alberta isn't short of money, they are short on sound fiscal management:
The Alberta government is frequently bailed out by non-renewable resource revenues, either in natural gas, oil or through the sale of land leases. Without that, the government would need higher taxes, deep cuts or both to balance the books. Spending in the province has ballooned since its debt was paid off in 2004, far outpacing its population and economic growth. As such, Canadian Taxpayers Federation Alberta director Derek Fildebrandt says Ms. Redford should be cutting spending, not complaining of dropping oil prices.
Maybe we need to follow the European example, specifically Norway, and take greater control of our natural resources. Maybe some kind of energy policy, but a national one. Everyone likes those.
When it comes to managing oil wealth, Canada has something to learn form our European neighbours. In a new report, CCPA’s Executive Director Bruce Campbell compares the Canada and Alberta experience of managing oil wealth to that of Norway and finds that for too long foreign and domestic petroleum interests have been appropriating a disproportionate share of the petro-wealth in Canada and blocking effective carbon reduction measures.
The report ultimately concludes that the Canadian government should heed the Norwegian example and reclaim control of the petroleum industry—collaborating with provinces, territories and first nations in building consensus around a national energy strategy.
Barring that, Alberta, and the rest of us caught up in their financial wake, can simply walk down the road, sing a happy tune, and dream of a better place, just past the horizon. That always works.