Premier Kathy Dunderdale is warning about the serious fiscal realities that come with lower-than-forecast oil prices — and a possible billion-dollar deficit next year.
Dunderdale said the price of oil doesn’t keep her up at night, but she’s definitely taking the situation seriously.
Ministers have been ordered to rein in all discretionary spending, delay projects where possible and leave positions vacant for a few months to save cash.
“We’re going to try to find efficiencies wherever we can. I’m not so worried about this year. I’m more worried about next year because if oil stays where it is, our deficit could be around $1 billion next year if we maintain everything the way that it is,” Dunderdale said. “That’s a reality check for everybody in the province.”
When the provincial government introduced this year’s budget in April, it was forecasting oil would average out at $124 per barrel. It has consistently been much lower.
On Monday, Brent crude was trading around $105 per barrel.
As it stands, the government is already forecasting a deficit of at least $250 million.
Dunderdale said the rough calculation is that for every dollar below their forecast, the province will be off its overall budget revenue projections by $20 million.
“If everything stays where it is now, our deficit could be up around $600 or $700 million,” Dunderdale said.
She said the volatile oil situation just serves to endorse her government’s press to develop other energy assets — especially the Muskrat Falls hydroelectric project in Labrador.
“We have to get our energy out of this province one way or another, because our future depends on it,” she said.
“You won’t feel the effect of it so much today, but in 2035 and onward if we have not found a way out of this place by that time it’s not going to be a pretty picture.”
The comments on energy came during a news conference with Dunderdale just before she leaves for the Council of the Federation meeting of Canada’s premiers in Halifax later this week.
Dunderdale used the opportunity to take a few shots at Prime Minister Stephen Harper for a perceived lack of leadership on health care, energy and other issues.
“Yes, absolutely premiers need to be involved and need to be stepping up, but we need to do that in concert with the federal government,” Dunderdale said.
“We haven’t seen a first ministers’ meeting in this country in a very long time, and we believe it’s time, perhaps, to start those again.”
She said her top priorities for the meeting will be energy and health-care issues, and on both of those files, a national strategy championed by the federal government would go a long way.
On health care, for example, she said she’s worried about a change to per capita funding from Ottawa.
“First of all, we think the federal government should be leading the development of a health-care strategy in the country, but given their absence, we’ve stepped into that void because it’s so important to Canadians,” Dunderdale said.
“The formula up to this date has been based on the principle that all Canadians, regardless of where you live, deserve a baseline quality of health care.”
Under a per capita formula, she said, smaller provinces in Atlantic Canada, especially, are liable to lose out.
The criticism of Harper may be the start of a significant change for the provincial government.
Dunderdale has conspicuously worked to foster better relationship with Harper than her predecessor, Danny Williams, who routinely picked sensational fights with the prime minister.
However, in more than a year since Dunderdale endorsed Harper in the 2011 federal election, she’s been steadily criticized for it, and held responsible for a litany of perceived slights from Ottawa.
In May, Dunderdale formally requested a meeting with Harper to deal with a spate of issues.
On Monday, two months later, she said she has yet to get a response.