Alberta faces larger than expected deficit

Alberta'sdeficit will be even bigger than officialshad feared,according toa third quarter forecast released in Calgary on Tuesday.

Alberta Finance Minister Doug Horner expects this year's deficit to reach between $3.5 billion and $4 billion, up nearly $1 billion from the last quarterly update. In the first nine months of the fiscal year, resource revenue was down $2.4 billionfrom expected.

"We can't control world market prices, but we can make decisions that will impact our bottom line both today and into the future. The premier has made it clear that, as a government, we will live within our means and hold the line on spending," Horner said.

As a result, the provincial government is freezing public sectormanager salaries for three years and laying off 10 per cent of those workers, or about 480 jobs,during the same period. Horner said that should send a strong message tothose currentlyin contract negotiations, such as the province'sdoctors and teachers.

"We have been fairly, I would say, consistent in saying there is no new money. So we're not telling them anything that is out of school," Horner said. "The fact is, this is where we are going with the management and opted-out [employees] and they should take that as a strong signal as to what we have in mind."

The salary freeze will save $54 million and provincial officials have identified another $600 million in savings across departments.

While Hornerblamed the problems on falling resource revenues, he said the Alberta economy is still growing and is the strongest in Canada.

Horner is set to deliver the province's budget on March 7.

Critics not surprised

Wildrose Party Leader Danielle Smithdescribed the budget as "quickly unravelling," adding that economists and politicians had warned the government that their projections were too rosy.

"One of the things I will say is we are happy to seethey've finally taken our advice and looked at the management to worker ratio," she said.

Alberta Liberal finance critic Kent Hehr said the province'sproblem shouldn't be blamed on falling oil and gas revenues.

"We need to budget more conservatively," he said. "We should pay for what we use by bringing in personal and corporate income taxes. If we ever want to get out of this cycle that we've been on for the last 40 years, Albertans need to operate on a pay-for-what-you-use principle."

Earlier in the day, the Fraser Institute think-tankissued a reportsuggesting Alberta's financial woes arethe result of spending increases above the rate of inflation.Spokesman Mark Milke said the funding of programs doesn't necessarily provide better services for Albertans.

"It depends on the choices you make. More doesn't necessarily equal more of anything, excepta more well-compensated public sector."