Province OKs higher debt for Crown agencies

About half of $2.7B borrowed to be used for capital outlays

The Sask. Party cabinet recently approved an increase to the amount of debt Crown corporations are able to carry.

This fiscal year, the province is expecting to borrow $2.717 billion.

About $1.062 billion of that is being borrowed by the province for Saskatchewan’s Crown corporations, largely to finance capital spending.

“The major Crowns have major infrastructure needs in terms of networks of all types,” said Jeff Welke with the Ministry of Finance. “Those are the big contributors in terms of the Crown sector, in terms of what they need for capital and their subsequent borrowing program.”

Welke noted not all of the infrastructure needs are being funded by borrowing, as some of it will be paid for with Crown revenues.

To allow for the borrowing to take place, the provincial cabinet issued $400 million worth of 30-year bonds in May. A portion of those funds — $50 million from SaskTel and $100 million from SaskEnergy — were advanced to this month.

Saskatchewan’s move to allow for more borrowing — and by extension, take on more debt — came on June 8, just weeks before Standard and Poor downgraded the province’s credit rating.

It lowered the province’s rating to AA from AA+ to reflect a weakened budget performance and growing debt.

But Welke said financial markets consider more than just the credit rating when deciding where to invest.

“In terms of how it affects our borrowing, it’s maybe a little too early to know for certain, but right now we don’t see the cost of borrowing being affected,” he said.

In the past, Finance Minister Kevin Doherty has justified adding debt to pay for operating expenses as well as other spending because of the strong credit rating and relatively favourable interest rates.

NDP finance critic Cathy Sproule, though, said government debt is “absolutely exploding.”

“That’s something that should be a concern to everyone, particularly when we get these downgrades,” she said, noting that could have an effect on the interest on debt being issued by the province.

Already this year’s budget has Saskatchewan taxpayers on the hook for $84 million more in debt interest payments than they were last year, and that number could increase as a result of the credit downgrade.

Overall, the province’s debt is projected to increase by about 10 per cent each year until 2021.