Tough years ahead for Alberta economy: Stelmach

Alberta's economy is in for a few rough years, Premier Ed Stelmach said Tuesday, amid reports the provincial deficit is more than $2 billion higher than originally projected.

"Even if the recession ends this year or next, government revenues will lag a year or two after that," the premier said during a Tuesday morning news conference in Edmonton. "Because as business recovers, as the economy grows and companies move back into very healthy profit margins, that's when government will see their revenues increase."

A government spokesman confirmed to CBC News Tuesday that the deficit is at $6.9 billion. At the beginning of his news conference, Stelmach said he would leave the details for Finance Minister Iris Evans to discuss in her update on Wednesday.

He did saythe province will use its $17 billion sustainability fund to continue to "protect the programs and the services Albertans need the most,"adding he believed the fund could last three years.

The government will also encourage voluntary retirements and monitor the effects of a hiring freeze before resorting to layoffs, Stelmach said.

"I don't want to put the province in a position where we lay off people and when the economy recovers we're scurrying back to rehire people," the premier said.

'It's a spending problem. The only way to fix a spending problem is to start cutting.' Scott Hennig, Canadian Taxpayers Federation

However, Stelmach would not say when a decision would be made on whether the government will decide to go ahead with job cuts.

"We'll see what happens as we go into the budget planning process," he said, adding that the government is watching what comes out of talks now underway between Treasury Board president Lloyd Snelgrove and the leaders of Alberta's public service unions. The talks, Stelmach said, are going "very well."

Stelmach's continued insistence his government will not raise taxes came under fire from LiberalMLA and deputy leaderLaurie Blakeman.

"This is a volatile economy," she said. "They've done nothing to make it less volatile and they've taken away a possible option in that the premier will not consider any kind of tax increases."

The news of the ballooning deficit is a stunning reversal from a year ago, when Evans was projecting a $8.5-billion budget surplus in her first quarter update for the 2008-09 fiscal year. Then oil prices tumbled and the world economy went into a tailspin. In her April budget, Evans projected a $4.7-billon deficit.

Alberta has relied too long on high oil and gas prices, said Scott Hennig, Alberta director of the Canadian Taxpayers Federation.

"I don't think we can plan for record highs every single year, recognizing that this really isn't a revenue problem. It's a spending problem. The only way to fix a spending problem is to start cutting," he said.