2010-2011 Alberta Budget Highlights

July 1, 2010 | Joseph W. Yurkovich

In its 2010-11 Budget, introduced in the Legislature on February 9, 2010, the Alberta Conservative government has sought to strike a balance between deficit reduction, and continuation of program and planned capital spending.

Reiterating its intention to return Alberta to an annual surplus within 3 fiscal years, the Government budgeted a deficit for 2010-11 of $4.7 billion on revenues of $34.0 billion.

Highlights include:

  • No new or increased taxes. Alberta remains the lowest tax jurisdiction in Canada, taking into account all provincial levies. Alberta has no provincial sales tax or harmonized federal and provincial goods and services tax (HST). Effective 2010, Alberta has eliminated its provincial health care premium.
  • Personal tax exemptions continue to be indexed to inflation, with the personal and spousal credit reaching $16,825 for 2010. The province maintains its 10% flat rate personal tax.
  • The provincial corporate tax rate remains constant, at 10% for general and M&P income, and at a 3% small business rate on income up to $500,000 annually.
  • Planned program spending of $33.2 billion means that the budget is essentially balanced on program spending, with the deficit being attributable to continuation of the province’s capital spending program.
  • Capital spending on approved projects will continue, but at lower costs due to economic conditions and with some projects “re-profiled” to help meet the commitment to return to a balanced budget by 2012-13.
  • Forecast deficits will be covered by withdrawals from the province’s Sustainability Fund, a $16.8 billion savings account specifically created for the purpose of managing unanticipated shortfalls in the provinces volatile revenue stream.
  • Provincial revenues remain sensitive to commodity prices and the U.S. exchange rate. A $1.00 change in the price of oil has a net annualized impact of $186 million on provincial revenues. A $0.10 change in natural gas prices changes revenues by $93 million and a $0.01 change in the U.S. exchange rate has an inverse effect of $215 million on provincial revenues.

The $4.7 billion forecast deficit is coincidentally the same amount as was forecast by the Province of Alberta as the deficit for 2009-10. On June 24, 2010, the province revealed that the actual deficit for 2009-10 was just over $1.0 billion, resulting primarily from stronger than expected bitumen prices and corporate tax revenues and a rebound in equity markets which permitted higher than forecast returns on the province’s investment assets. These larger than anticipated returns were offset by a sharp reduction in revenues from natural gas. At $1.5 billion, natural gas royalties were off estimates by almost $2.2 billion, due to lower U.S. demand and structural price declines brought about by the advancement of shall gas technology.

The combination of reduced natural gas prices and the increase in bitumen prices and production means that in 2009-10, for the first time in Alberta’s history, royalty revenue from the oil sands and other heavy oil deposits ($3.16 billion) exceeded royalties from natural gas, providing further emphasis of the fundamental importance of these resources to Alberta and Canada.

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