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In Throne Speech Prentice promises balanced books despite volatile oil prices

Alberta Premier Jim Prentice waves to the gallery during before the speech from the throne at the Alberta Legislature in Edmonton, on Monday November 17, 2014.

JASON FRANSON/THE CANADIAN PRESS

Alberta's Progressive-Conservatives have vowed to keep the province's books in balance and taxes low while continuing an ambitious plan to build roads, schools and hospitals across the fast-growing province.

In a Speech from the Throne on Monday, the Tories said this will happen even though volatile oil prices are wreaking havoc with the provincial coffers and threatening to stall Canada's economic engine.

With a thin surplus estimated at only $1.4-billion in August, Premier Jim Prentice's government has limited fiscal room to build new infrastructure as revenue plunges. While Monday's throne speech ruled out introducing a provincial sales tax to help finance new infrastructure, it was quiet on the future of Alberta's flat income tax.

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"It's not what's in the speech that was interesting; it's what's not in there. They rule out sales tax, that's gospel in this province, but he doesn't rule out returning to a progressive tax," said Duane Bratt, the chair of policy studies at Calgary's Mount Royal University.

The government's budget this year was based on oil trading around $95 per barrel. Oil now trades around $75, with expectations that it could hover around $70 for much of the next two years.

"We will run the government of Alberta in the black ink," Mr. Prentice said on Monday, adding that "a $75 barrel of oil is not business as usual."

With debt rising as the province borrows to build infrastructure, the government has warned that it will need to protect spending on priorities. The throne speech unveiled plans to cap spending on administration, keeping it below the rate of inflation and population growth.

"A budget tied to volatile energy prices imperils our fiscal resilience over the long term," Lieutenant-Governor Don Ethell read in the speech. "At the same time, Alberta's tremendous population and economic growth have shown us the perils of failing to maintain what we have, and the importance of investing in what we need."

Opposition leaders expressed surprise that the throne speech was not clearer on the government's plan to confront economic uncertainty.

"I'm astonished we didn't see any mention of oil prices headed towards $70. This is a government that couldn't balance the budget on $100 oil and there are some enormous spending promises put on the table," Wildrose leader Danielle Smith said.

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Over the past decade, Mr. Prentice's predecessors have considered different ways to raise revenue. Increasing royalties and introducing a sales tax have been too unpopular to consider. At a Progressive Conservative conference on the weekend in Banff, party members favoured tolls on the province's new roads.

Despite the vow of fiscal prudence, the government plans to build 78,000 new school spaces to help deal with a rapidly growing population. New funds were also committed to flood mitigation reservoirs and new diversion systems. Communities around Calgary continue to recover from significant floods in the summer of 2013.

Besides tolls, the few options available to raise the kind of revenue needed by the government, according to Mr. Bratt, include a progressive tax or the re-introduction of health-care premiums.

Albertans currently pay 10 per cent of their income in tax. A progressive tax would introduce different rates for different income levels. While Mr. Prentice has indicated in the past that he would not change the flat tax, he has indicated recently that his government is looking at new revenue sources and would not comment until after a fiscal update expected in late November.

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