Although the economies of Alberta and Newfoundland and Labrador have both been hit hard by the plunge in oil prices, Alberta is in a far better position to cope with the fallout.

In budgets presented on April 14, Newfoundland and Labrador was forced to raise taxes significantly and slash spending, while Alberta had the wherewithal to stimulate its economy.

The radical difference in approach is the result of the fiscal capacities of the two provinces. As of March 31, Alberta had $4 billion in net assets, while Newfoundland and Labrador had $12.6 billion in net debt. Furthermore, Newfoundland and Labrador ‘s economy is comparatively small, and its debt amounts to 41% of gross domestic product (GDP) – and will rise to 49.5% in the next year even with the big tax increases and large spending cuts.

Joe Ceci, Alberta’s finance minister, projects that the province’s debt will reach $57.6 billion by March 31, 2019. Although that figure may sound like a large amount, it represents just 15.5% of Alberta’s GDP – and that percentage drops to 8.9% when the $16 billion in Alberta Heritage Fund assets are included.

(As of March 31, British Columbia had the lowest debt burden among the other provinces, at 17.4% of GDP.)

Put another way, Newfoundland and Labrador’s deficit for fiscal 2017 is projected to be 6.2% of GDP ($1.8 billion); Alberta’s, just 3.3% ($10.4 billion).

That means Alberta has the luxury of being able to run deficits for years – and indeed plans to follow that path. Ceci said the provincial budget may not be balanced until 2024.

The key factor for both provinces is what happens to the price of oil. Alberta is assuming the West Texas intermediate (WTI) oil price will be US$42 a barrel in fiscal 2017, US$54 in 2018 and US$64 in 2019. The WTI price is the North American price; Newfoundland and Labrador’s offshore producers receive Europe’s standard, the Brent price, which is always higher than the WTI. The latter province’s budget assumes the Brent price will be US$40 a barrel this fiscal year, US$52 in 2018 and US$60 in 2019.

Both provinces’ budgets included a contingency allowance in case oil prices – and, thus, oil royalties – are lower than assumed. This scenario will add $700 million to Alberta’s projected deficit for fiscal 2017, $1.5 billion for 2018 and $2 billion for 2019. Newfoundland and Labrador’s contingency allowance will add $125 million each year to the province’s deficits.

Of course, the possibility exists that oil prices could surprise on the upside. Sebastien Lavoie, assistant chief economist with Laurentian Bank of Canada in Montreal, is forecasting a WTI price of US$68 by Dec. 31 and US$75 at the end of 2017. This forecast is based on declines in U.S. shale oil production, increases in demand with the summer driving season and a freeze in production by the Organization of Petroleum Exporting Countries (OPEC) that will be followed by cuts in production by both OPEC and Russia.

However, other economists aren’t as optimistic. Both Mary Webb, director of economic and fiscal policy with Bank of Nova Scotia, and Michael Dolega, senior economist at Toronto-Dominion Bank (both in Toronto), say both budgets’ oil price assumptions are in line with their own.

Not surprising, Newfoundland and Labrador’s budget had far more measures than Alberta’s. Alberta’s biggest move is imposing a carbon tax of $20 a metric tonne as of Jan. 1, 2017, which rises to $30 a year later. This tax is similar to what B.C., Ontario and Quebec have done or announced. Webb notes that Alberta’s carbon tax has more exclusions than the others, but adds that it nevertheless should do the job of giving credibility to Alberta as a leader in protecting the environment.

The carbon tax will increase prices for gasoline and heating fuel; however, the province is providing offsets, with rebates to low- and middle- income consumers and a cut in the small-business tax rate to 2% from 3%, both as of Jan. 1, 2017.

Alberta’s New Democratic Party government raised personal income tax rates in its October 2015 budget – but isn’t cutting services. Indeed, program spending is projected to increase by 3.1% in fiscal 2017, by 4.2% in 2018 and by 3.4% in 2019. This includes a new Alberta Child Credit, and the Employment Tax Credit will be enhanced for lower-income families.

Furthermore, Alberta is trying to encourage economic diversification through reinvestment of the proceeds from the carbon tax and a couple of new tax credits.

Consumers – and businesses – in Newfoundland and Labrador have been hit hard. There is virtually no tax or fee that isn’t increasing in the province. There’s a new “temporary” deficit-reduction levy on taxpayers of up to $900 a year, as of July 1. (The government has committed to phasing it out, starting in 2018.) And program spending is expected to remain near current levels through fiscal 2023.

There will be major increases in personal income tax rates, ranging from one percentage point for the lowest bracket to three percentage points for the two top brackets during 2016-17. And the province’s harmonized sales tax increases to 15% from 13% on July 1.

The corporate tax rate was increased retroactively to 15% from 14% and the manufacturing and processing profits tax credit was eliminated, both as of Jan. 1. There also were hikes in the financial corporations and insurance companies tax rates.

The government also is doing a thorough review of expenditures to find savings, both within program spending and across the broader public sector. Measures resulting from this effort will be announced in a mini-budget in the autumn, as well as in the next annual budget.

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