The Canadian Press

Alberta’s Progressive Conservative government plans to run a record deficit and deplete its savings account in a budget that forgoes the kind of deep spending cuts that fiscal hawks have been screeching for.

The budget includes about $1.3 billion in cuts to many departments, but those savings are being redirected to key areas such as health and education instead of to the bottom line.

There are no tax increases, but up to 250 people could lose their jobs out of the 27,000-member civil service in the first government layoffs in more than a decade.

Finance Minister Ted Morton said he is not happy the budget includes a $4.7-billion deficit, but is confident his overall financial plan will help Alberta be back in the black by 2012.

“These are difficult times and difficult times call for difficult choices,” Morton said Tuesday.

“Some are going to say we should do all we can to stay out of deficit — even if it means deep cuts to essential programs. Others would say we shouldn’t worry about a deficit.

“You can’t have it both ways. These choices, we believe, strike the right balance.”

The tone of the budget is a surprise since the government had suggested it was considering a $2-billion “correction” to deal with its deficit, which began in the last fiscal year.

Speculation there would be deeper spending cuts increased after the Tories lost a byelection in Calgary last fall to a fledgling conservative rival, the Wildrose Alliance. That speculation ramped up further when two government members jumped to the Wildrose, saying they were unhappy with Premier Ed Stelmach’s leadership and the state of Alberta’s finances.

The big winner in the budget is health care. The government will pay off Alberta Health Service’s $1.3-billion deficit. The department will also get a 6% funding increase in each of the next three years.

School boards will share a $250-million increase, mainly to deal with enrolment growth.

Programs for seniors and people with disabilities will get modest increases to maintain existing service levels. There is also money to hire 100 new police officers.

But all these increases come at a cost.

The government plans to scoop almost $5.8-billion this fiscal year from a $15-billion sustainability fund set up with money from previous surpluses. It plans to raid this piggy bank again in the next two years to the point where it could effectively be drained by 2012.

Alberta still has the $13.8-billion Heritage Savings Trust Fund, which the government manages as an endowment fund. The government expects to earn about $1 billion in investment income from the fund in the coming fiscal year, which will be funnelled into general revenue.

Communities across the province will not get as big an increase in their municipal infrastructure support funding as originally planned. The change will cost Calgary about $150 million this year and Edmonton about $100 million.

Fifteen departments, including Advanced Education, Agriculture, Children’s Services, Culture, Environment and Sustainable Resource Development, must all absorb cuts to their operating budgets.

Morton, who considers himself a fiscal conservative, said he thinks most Albertans will like the budget. He bristled at the suggestion that some might not support the idea of taking so much money from savings.

“Why is this called a rainy-day fund?” Morton asked. “It is called a rainy-day fund for when it rains. And I’m here to tell you that over the past 18 months it has been raining all over the world.”

Business and fiscal conservative groups were shocked.

Wildrose Alliance Leader Danielle Smith called it a broken promise that will just pump more debt into an already overflowing sea of red ink.

“This budget shows they have completely given up any hope of controlling spending,” Smith said.

“We are racking up debt. We are blowing through our savings. Very disappointing. I think Minister Morton lost a lot of credibility today by putting his name to this train wreck.”

Scott Hennig of the Canadian Taxpayers Federation said the lack of real spending cuts and the drawing down of Alberta’s sustainability fund are unbelievable.

Jack Mintz, director of the University of Calgary’s School of Public Policy, said the budget will not go over well with fiscal conservatives in boardrooms or in the Tory rural heartland.

Last week the school issued a paper calling for a $5 billion in spending cuts to bring Alberta in line with other provinces. The Canadian Taxpayers Federation was calling for a $6.4 billion cut.

@page_break@Richard Truscott of the Canadian Federation of Independent Business said he is disappointed the government isn’t showing more spending restraint. He said the small business sector was hoping for some tax relief and measures to cut red tape.

“If I had to grade this budget, I would give it a zero,” Truscott said.

The government was roundly slammed for the spending reductions it did make. New Democrat Leader Brian Mason said cuts to low income housing will hurt some of the most vulnerable people in the province.

Guy Smith, president of the Alberta Union of Provincial Employees, took aim at cuts to Children and Youth Services. He said if the cuts affect staffing levels it will be the kids that suffer.

“Already the staff who provide those services are overworked,” he said. “There is already a crushing workload and there is not enough staff.”

Dave Eggen of the group Friends of Medicare was one of the few who praised the budget. He said the government deserves credit for increasing health spending.

Eggen said the government’s plan to increase spending over the next five years will help fix some of the cracks in the system.

“I think this shows the power of speaking out. Albertans have been saying that more health cuts would be wrong. I think you see this budget reflecting that,” he said.

Alberta is currently reviewing the rates it charges energy companies to extract oil and natural gas in the province. The industry is anxiously waiting for the findings, saying current rates are stifling development.

Morton said the review will be presented to the government in March and, if changes are made to the royalty system, they will be factored into the budget in a quarterly financial update later this year.