Alberta Cutting $1 Billion from This Year's Budget as Energy Prices Slump

- FORT McMURRAY, Alta. (CP) - Alberta trimmed at least $1 billion from its current budget Thursday as energy prices slump in the wake of the terrorist attacks on the United States.

"There are unexpected challenges caused by the startling, unprecedented events of Sept. 11," Premier Ralph Klein told nearly 400 people attending the annual premier's dinner Thursday.

The sweeping measures announced by the premier include shelving $500 million in building projects; cutting one per cent or about $180 million from base spending for all government departments; an immediate hiring freeze; and freezing "discretionary" spending, including some travel.

"This means that some expenditures or purchases that were planned for later this year will not occur," said the premier.

However, about $300 million of the total being trimmed was money set aside for energy rebates in the event of high prices, and was therefore money that likely would not have been spent anyway.

The building projects said to be in jeopardy include a new arts-based high school in Edmonton and two $125-million health facilities - an orthopedic centre in Calgary and a facility in Edmonton specializing in heart treatment.

The premier also issued a warning Thursday that "all ministers have been told to be ready to change their budget projections for the next two years" if energy prices remain low.

The premier laid out the grim reality of how the terrorist attacks in New York and Washington are now sending out shock waves affecting Alberta's budget, which had forecast more than $7 billion in energy revenues in this fiscal year.

"Since Sept. 11, there have been sharp drops in oil and natural gas prices," said Klein. "It would be foolish for any government not to be prepared to deal with the caution and unpredictability the global economy is facing."

Brian Mason of the NDP accused Klein of being among those in government and business who are using the attacks on the United States as an excuse for not keeping their commitments.

"They made a large number of promises to Albertans in their last campaign and they assured us, notwithstanding their tax cuts for big corporations and wealthy individuals, that they were able to meet these commitments even if oil and gas prices fell," said Mason.

"Now they're saying they can't do it. It seems to me that the provincial government has misled Albertans now that the election is safely out of the way."

Dan MacLennan, president of the Alberta Union of Provincial Employees, said news of a hiring freeze is not good.

"There's areas like child protection and other areas where they can't get people to apply for those jobs," he said. "Those jobs actually I don't view as costing the government money, they save money in the long run."

But MacLennan insisted the government's announcement would not affect bargaining scheduled to begin for some of his members the first week of October

"We still think now is a good time to be bargaining. Our members rightfully expect a good wage increase this time. And we think we're in the best economy in Canada."

Klein noted that the terror attacks have resulted in huge swings in energy prices, with world oil prices dropping 15 per cent in one day this week.

Even slight variances in oil and natural gas prices have a major impact on Alberta's revenues. Every $1 US drop in the price of oil reduces provincial royalties by $153 million.

But the premier tried to put the best face on the spending cuts, promising to "weather this storm without raising taxes," and pointing out that provincial laws prevent the government from running a budget deficit.

Klein also assured the audience that "the impact of a world recession will be felt far less in Alberta than in other parts of Canada and the world."

The premier said a more detailed report on the state of Alberta's finances will be released in about three weeks when Finance Minister Pat Nelson issues a revised economic report.