Alberta needs to rely less on resource revenue, experts say

Experts say the Alberta government needs to change how much it relies on resource royalities to supply government revenues.

Finance Minister Doug Horner said on Wednesday that volatile oil prices and increased domestic oil production in the United States are hurting Alberta more than expected.

University of Calgary professor Jack Mintz warned the government in a report several years ago about the dangers of relying too heavily on oil revenues.

He believes the province's finances are worse than Horner is suggesting.

"It's a continual view of hope that somehow we'll get lots of revenues coming in due to high prices. We'll have lots of spending and keep our taxes low," he said on Thursday.

"I think right now the whole fiscal planning approach of the Alberta government is now in shambles."

Mintz said the billions of dollars saved in the sustainability fund will soon be gone and the province may be forced to take other actions.

"We're now looking at likely a cash deficit of close to $5 billion this year and probably not too far off next year," he said.

"We are therefore going to see no sustainability fund left and the province is going to have to borrow unless it decides to raise taxes, or undertake major cuts to spending."

Richard Dixon is with the Centre for Applied Business Research in Energy and the Environment at the University of Alberta.

A report he sent to the Alberta government a year ago predicted energy revenue would drop because Americans weren't relying as much on Alberta oil.

"The United States has increased their oil production dramatically," Dixon said. "And so they don't need our oil as much."

Alberta needs to find new markets for its oil in order to generate more royalties, Dixon said.

While the financial situation was deteriorating, the province continued to make promises to groups like teachers.

"Up to two weeks ago, government was still committed to increasing the instructional grant," said Dennis Theobald from the Alberta Teachers Association.

Talks with the province have since broken off and the ATA will now negotiate individual contracts with each of the 62 school boards.

Theobald believes cuts will lead to fewer teachers and larger class sizes. He believes that Alberta should take a look at raising taxes.

"Let's not forget, this is about political will and decision-making and priorities," he said.

"Alison Redford has said she's not going to look at any new taxes. Well, if we depend on commodities to fund our basic operating programs, and those prices for commodities vary, we're going to have this problem from time to time."