Alberta posts a deficit....WHAT?

[banquo's_bumble_puppy]

I heard on the news yesterday that Alberta is 1 billion in the red. Isn't that like saying Saudi Arabia is a billion in the red? Things must be bad....things are bad....wow

[peteshimmon]

One billion what? And where is Alberta?

[peter eldergill]

Alberta is in western Canada, bordering on British Columbia. There is lots of oil in Alberta and that has made it a wealthy province. All good things ....

I don't know the details but I think it's mainly due to the massive drop in price of crude oil

Pete

[peteshimmon]

OK thanks! Sounded like a remote part of the
World for a moment

[لطفيّ]

I heard on the news yesterday that Alberta is 1 billion in the red. Isn't that like saying Saudi Arabia is a billion in the red? Things must be bad....things are bad....wow

Remember last year when everyone was talking about how bad things were because the price of oil was so high? Now they can do the same thing because it is so low.

[Argos]

Iīm not intending to meddle in Canadian affairs, but that 'loss of revenue' discourse is widespread [down here it is put out by corporations - like banks - trying to justify job cuts - as if 2008 hadnīt been a year of astronomical profits].

Re Alberta, I wonder what has been done of the revenues of the 150-dollar/barrel times. It suggests that the provinceīs finances were already on the brink.

[banquo's_bumble_puppy]

Alberta has as much oil or more than Saudi Arabia.....it is very dirty oil....it costs a lot to get out and leaves a huge carbon footprint

[Swift]

I know close to nothing about Canadian provincial budgets, but just about every state in the US has state budget deficits. Economy goes down, less income, lower property values, states collect less taxes, state budget has less money. It would be surprising if it didn't happen.

[Torsten]

A deficit means that the government will be taking in less revenue than it spends. The difference has to be made up by borrowing or by liquidating assets that it may own. Alberta has had at least 6 prior years of surplus budgets that exceeded forecasts. Much of this excess revenue was invested in what they call the Heritage Fund. Just before the market did its ugly thing a few months ago, the value of that fund was $15.8 billion, not bad for a province of 3 million people.

ETA: I should add that they were under huge pressure to spend those surpluses to provide the infrastructure for their rapidly growing economy. Also, Argos' link explains it too.

Alberta has conventional oil reserves and natural gas. It also has the potential to develop coal bed methane, and huge reserves of tar sands, or bitumen. To extract oil from the tar sands is an energy intensive process, and large amounts of gas are consumed doing it. Therefore, a barrel of tar sands-derived oil has already left a large carbon footprint before it makes it to market. Anyway, this is what is referred to as dirty oil, but it is by no means all of Alberta's production.

[Ronald Brak]

Unfortunately most US states are required to produce balanced budgets. This means that in the current unfortunate economic situation many are looking at drastically cutting services, increasing hardship in those states. Technically they can be helped out by the federal government, but that doesn't seem to have worked out so well.

[Gillianren]

I know Washington is facing a major deficit. Not only are they cutting services, but they're cutting jobs. In fact, the only place they're hiring these days is for the operators covering the unemployment bureau's help lines.

[Parrothead]

The budget was written at a time when oil prices were high. Now that the price has dropped from $100 - $140/barrel to $40/barrel, revenues will not meet budgeted targets, turning a budgeted surplus to a deficit. This made news last fall already, when the price of oil started dropping. Same goes for any government that relies on petro dollars, revenues will not meet budgeted expectations.

[NEOWatcher]

A deficit means that the government will be taking in less revenue than it spends.

Or expected to spend.
I don't know how the budget works in Alberta, but I hear many times about "in the red" or "deficit" meaning that they have plenty of money for what they need to do, but not as much as they expected to get (or save).

[Ronald Brak]

I'll mention out that it is generally best for budgets to be balanced over the business cycle, meaning that you'd expect them to produce surpluses when the economy is good and go into the red when times are bad.