Alberta projects deficit to swell to nearly $11B after $500M wildfire hit

EDMONTON -- The devastating Fort McMurray wildfire is expected to torch Alberta's bottom line by about $500 million this year.

Finance Minister Joe Ceci says he has had to revise the projected deficit upward in his first-quarter fiscal update to almost $11 billion from $10.4 billion.

"I don't need to tell my fellow Albertans that as a result of the oil-price shock, the economic headwinds facing Alberta remain strong. Albertans see that every day. Many are suffering significant hardship," Ceci said Tuesday at a news conference where he released the latest numbers.

"This year those headwinds are blowing even harder as a result of the Wood Buffalo wildfire."

Regardless, Ceci said, the province will stick to its plan of avoiding deep cuts to the civil service, while continuing to accumulate debt to pay for roads, infrastructure, health and education.

"We're not going to make knee-jerk cuts. We're not going to make things worse for Albertans," he said.

Alberta Finance Minister Joe Ceci, The Canadian Press

The May fire in northern Alberta forced more than 80,000 people to flee for a month and destroyed 2,400 homes and buildings in the oilsands hub city.

Ceci said the province paid out $647 million in disaster relief, a figure reduced to $195 million after federal aid transfers.

In an interview with BNN, Ceci said the federal government has provided support, but Alberta will continue to make its case for funding for additional costs.

"They have stepped up – the federal government has – in terms of EI enhancements in this province so that’s a good thing," Ceci told BNN. "They’ve come through with additional transportation moneys, social housing moneys and we’re putting those to use to put Albertans to work in terms of construction around roads, around social housing [and] around seniors’ lodges."

On top of that, the province estimates it lost another $300 million in revenue, because the fire severely curtailed oilsands and forestry activity in the area. An estimated 40 million barrels worth of production was lost.

The government forecasts Alberta's overall oil production for the 2016-17 fiscal year will be down about four per cent due to the shutdown.

Rebuilding parts of Fort McMurray is expected to boost provincial growth in the years to come, but business losses are expected to cancel out any such stimulus this year.

Insurable losses from the wildfires are pegged at $3.6 billion.

The Fort McMurray numbers come on top of gloomy forecasts as low oil prices continue to depress Alberta's economy, although a modest recovery is predicted for 2017.

Ceci told BNN that infrastructure spending will be crucial to the province’s economic recovery.

"What we’re doing as a province, a government, is cushioning the blow to Albertans by making sure that as much infrastructure capital investment that is possible – over $8 billion – goes into this province and gets utilized to build hospitals, schools roads and other infrastructure," he said.

"We want construction to happen with the spare capacity in this province right now as a result of the downturn and so many people being unemployed. We can’t do it all, though."

Alberta's real GDP, the benchmark figure representing all of Alberta's newly produced goods and services, is predicted to fall 2.7 per cent, mainly due to the fire. It fell 3.7 per cent last year. It's a back-to-back plunge not seen since the last Alberta oil crash in the 1980s.

Real exports were expected to go up by 1.9 per cent. Instead, they're now predicted to fall 1.7 per cent.

Alberta will rack up $32 billion in debt this year and remains on track for $58 billion in debt by 2019.

Debt servicing costs have now surpassed $1 billion a year and Alberta's debt-to-GDP ratio is up to 10.25 per cent.

Opposition Wildrose critic Glenn van Dijken said the NDP needs to create a plan to balance the books by reducing spending and streamlining services, rather than simply wishing high oil prices will return.

"If we don't act now, it will only mean higher taxes for future generations and less services," said van Dijken.

Progressive Conservative Leader Ric McIver agreed.

"It's evident that the NDP has no intention of being responsible stewards of taxpayer dollars and will forge ahead with their reckless agenda, no matter what it ends up costing Albertans," said McIver in a news release.

Alberta Party Leader Greg Clark said NDP policies are failing Albertans, starting with a hike of the corporate tax rate to 12 per cent from 10 per cent.

"Despite big corporate tax increases, Alberta's tax revenues are way down and will continue to drop because the NDs have done nothing to create a positive investment climate," Clark said in a news release.

"In fact, they've done the opposite."

BY THE NUMBERS:

$10.9 billion -- Alberta's estimated deficit pushed up $500 million to almost $11 billion by the wildfire in Fort McMurray

$195 million -- Amount paid out by the province in disaster relief after federal aid transfers

$300 million -- Amount Alberta estimates it lost due to wildfire's impact on energy and forestry industry

8 per cent -- Unemployment is expected to remain at this level

2.6 per cent -- Decline expected in average weekly earnings

80,000 -- Job losses in the goods-producing sector since mid-2015

$877 million -- Decline in corporate tax revenue to $3.4 billion from the April 14 budget forecast

$11.6 billion -- Revenue expected from personal income tax. About $215 million more by the end of the fiscal year than originally forecast

$32.2 billion -- Alberta's estimated debt Expected to climb to $58 billion by 2019

$7.1 billion -- Alberta's estimated borrowing this year to pay for day-to-day operating expenses

$19.6 billion -- Amount expected to be in the Heritage Fund, Alberta's long-term savings account

1.5 per cent -- Amount Alberta's population is expected to grow this year, partially due to the influx of Syrian refugees

With files from BNN