Alberta Finance Minister Joe Ceci announces that the province is freezing the salaries of 7,000 managers and other non-union employees for two years.Dean Bennett/The Canadian Press
The Alberta government will be freezing the salaries of a quarter of the civil service for the next two years, as the province confronts a steep and persistent decline in energy prices.
Finance Minister Joe Ceci, in making the announcement on Wednesday, declined to confirm whether the government will keep within the $6.1-billion deficit it projected for the fiscal year ending on March 31.
"We're under severe pressures on the revenue side," Mr. Ceci said, speaking at the provincial legislature. "We are doing our utmost to bring in our deficit where we targeted, but we're also doing our utmost to protect services and invest in the economy."
The salary freeze will affect 7,000 non-unionized civil servants and is projected to reduce spending by $28.5-million annually. Most of the affected workers are classified as managers and were slated to receive a 2.5-per-cent pay bump this year.
Premier Rachel Notley's NDP government will pay out about $25-billion in salaries during 2016, representing nearly half of government revenue. Over the next two years, it will negotiate new contracts with the province's nurses, teachers and the Alberta Union of Provincial Employees.
AUPE president Guy Smith warned that morale will suffer due to the freeze. "I'm a little surprised that the government took this step. This doesn't have any impact on the overall budget deficit at all, but it does impact the lives of hard-working management and senior management," he said.
According to Mr. Smith, most of the employees who will see their wages frozen are on Alberta's Sunshine List, which discloses the names of all provincial government workers who earn more than $104,754.
Salary freezes have been used in the past by governments grappling with Alberta's boom-and-bust economy. A freeze announced in 2013 was abandoned a year-and-a-half later. The salaries of Alberta's legislators have also been frozen until the next election, expected in 2019.
With the price of a barrel of oil at $30.56 (U.S.) on Wednesday, far below the Alberta government's projection of $50 for the 2015-16 fiscal year, billions of dollars in revenue have disappeared from the provincial balance sheet. Alberta faces its largest budget deficit in two decades, and Ms. Notley's government plans to end the province's debt-free status and take on nearly $50-billion in debt by 2020.
Underscoring the province's fiscal difficulties, Standard & Poor's downgraded Alberta's credit rating in December. Highlighting weak revenue and growing debt as risks, the province's pristine credit rating was lowered from AAA to AA+, increasing borrowing costs at a time when Alberta is preparing to borrow $34-billion over the next five years for infrastructure projects.
Mr. Ceci and other cabinet ministers have warned in recent weeks that the government could begin to cut spending in a budget expected this spring, imperilling campaign promises such as $25-a-day child-care spaces and thousands of new long-term care beds.
The NDP plan to balance the budget by the next election in 2019 depends on a recovery in energy prices. Only three months ago, the government was forecasting that a barrel of oil would average $61 (U.S.) in 2016.
With energy prices unlikely to rebound that quickly, the province's opposition parties have called on Ms. Notley to do more to balance the books. Interim Progressive Conservative Leader Ric McIver said on Wednesday that the savings from the wage freeze were "just a drop in the bucket."
The Wildrose Party, the Official Opposition, also called on the government to address "the much larger problem of bureaucratic bloat."
Justin Giovannetti