Canadian economics - equalization payments?

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Equalization payments are comming from the haves...when they don't have so much anymore what will happen to the have nots?



From the Candian Press:

Weak natural gas prices push Alberta's deficit to a record $7 billion.

EDMONTON - Alberta's energy boom gone bust has left the province with projections of a record $7-billion deficit and if natural gas prices continue to fall, there could be even more red ink by the end of the fiscal year.

Finance Minister Iris Evans has ordered provincial bureaucrats to find $430 million in program savings, but deeper cuts are coming as the government scrambles to trim $2 billion from the budget by next year.

"Quite frankly, our earnings took a real kick in the head," Evans told a news conference Wednesday. "We are heavily dependent on our oil and gas revenues."

"Global economic turmoil is deeper and more sustained and natural gas prices are lower than originally forecast and the result is a higher deficit than we predicted."

The new deficit number included in Alberta's first-quarter update is $2 billion more than the original budget forecast. But the latest forecast is based on a prediction that natural gas prices will nearly double to $4 per gigajoule for the remainder of the fiscal year.

Some market analysts are predicting exactly the opposite for natural gas prices in the coming months because of large inventories of gas in storage and a weaker North American economy.
Evans was coy about whether the deficit could get even worse given these dour predictions. When asked if continued weak gas prices could increase the deficit, the minister said flatly: "Not in this forecast."

Scott Hennig of the Canadian Taxpayers Federation said with financial reports this week predicting gas prices falling below $1 per gigajoule, Alberta's deficit projections are overly optimistic.

"I have no confidence that this (deficit) number is going to stay where it is," said Hennig. "I think it could reach $8 billion or even $8.5 billion."

Jack Mintz, former president of the C.D. Howe Institute, also said the deficit could end up being worse if natural gas prices fall lower. But he also said the province may be overly optimistic in its projections for tax revenue....

Total revenue for the year is now forecast at $29.6 billion, while expenses are pegged at $36.4 billion.