Alberta credit rating cut after debt-laden budget
Premier Rachel Notley said her financial plan is the best way to leverage Alberta's existing assets to move away from dependence on oil and gas
EDMONTON—Alberta got hit with a credit downgrade less than a day after it announced removal of its debt ceiling and $58 billion in debt by 2019.
Credit rating agency DBRS knocked Alberta’s rating down a notch to double-A, saying the NDP government’s reluctance to rein in spending or increase taxation would push debt levels higher than a triple-A rating could justify.
Premier Rachel Notley told reporters her team had discussed the possibility of a downgrade before the budget, which includes a $10.4-billion deficit this year along with renewed spending on infrastructure, operations and job diversification initiatives.
But she said her government’s long-term financial plan is the best way to leverage Alberta’s existing assets to move away from dependence on oil and gas revenues.
“We can do one of two things,” said Notley.
“We can turtle … or we can say we have all these incredible resources that are gathered here in Alberta, and as a government we can invest in them in order to transition the economy.
“We have a made a decision in the course of the next three or four years to do that.”
Moody’s, in its response to the budget, maintained its triple-A rating for the province, but said rising debt levels and weakened fiscal circumstances will exert growing pressure on the rating.
Notley also spoke Friday on the new carbon levy, set to begin Jan. 1.
She said the fee asks everyone to pitch in for the environment, but said it must be tempered by the reality that not everyone can pay.
“It’s not really an ‘Oh, we’re all in this together (situation)’ because it’s not a tax.
“Money is going right in and money is going right back out, and in fact there are a number of other ways in which people will get the benefit of this levy above and beyond the rebate.”
Thursday’s budget revealed the structure of the carbon levy, the centrepiece of Alberta’s climate change strategy.
It will hike the cost of home heating bills and gas at the pumps.
The province estimates the cost to the average household is expected to be $338 dollars in 2017 and $508 the year after that.
There will be rebates for middle and lower-income families, equivalent to 60 per cent of Alberta households. The rest of the proceeds will go into green initiatives, including public transit.
Anyone making more than $51,250 a year or couples with four kids and a combined income over $103,000 will not receive any money back.
Notley said research supports this approach.
“Most of the modelling and most of the expert advice we receive is that low-income people are not actually the big emitters. It tends to be middle and higher-income people,” she said.
Notley said with the rebates, families at the lower end of the scale can get “a bit of a bonus” for going greener but won’t be penalized if they do not.
Alberta Party Leader Greg Clark said he’s in favour of a carbon levy in principle but questioned the approach.
“I think the very lowest income Albertans, maybe the lowest quarter (getting rebates) _ that’s reasonable,” said Clark.
“But when you have more than half the province (getting rebates), there’s no disincentive to burn carbon, to continue to drive a lot, or heat your home.
“This feels more like a wealth redistribution tax.”