Saskatchewan needs to get real with budgets

Political leadership has gone missing amid red ink, writes Todd MacKay.

It takes great leadership to recognize when a plan isn’t working and change it. The province’s budget plans aren’t working. Saskatchewan needs a renewed resolve to make a better plan for the future.

First, let’s have an honest conversation about where we’re at.

Saskatchewan ran an operating deficit of $1.2 billion last year, according to recently released public accounts. Spending went over budget by $516 million. Revenues were lower than predicted by $398 million.

In the previous year, Saskatchewan ran an operating deficit of $1.5 billion. Spending went over budget by $137 million. Revenues were lower than predicted by $792 million.

It’s obviously impossible to predict specific expenses such as forest fires or frozen crops, but it’s a good bet that something will go wrong every year and budgets need to be strong enough to withstand those events.

When spending soars more than a hundred million dollars over budget in multiple years, a lack of foresight is as much a problem as the unforeseeable.

Then there’s the issue of overly optimistic revenue projections, especially regarding the price of oil.

The government cites independent experts for the projections, but, if the past few years have taught us anything, we have to be prepared for prices to go down as well as up.

Unfortunately, the provincial government has developed the habit of counting on rising oil prices. In the 2015-16 budget, the province predicted oil at $53 and rising to $88 by 2019. The next budget forecast oil at $45 and rising to $70 by 2020. Experience has proven that counting on rising oil revenue is not realistic.

Unfortunately, there’s reason to worry the most recent budget repeats those mistakes.

The provincial budget’s spending projections are based on a plan to trim compensation for provincial employees by $250 million. It’s unclear whether that’s actually going to be accomplished. Even if the reductions are implemented halfway through the year, spending is likely to be over budget by more than a hundred million dollars.

Predictions regarding oil prices have fallen into the pattern of the past few years. The current budget is counting on $56 oil that rises to $70 by 2021. So far this year, oil prices have stubbornly stayed below $50.

Unless that changes, the province now estimates revenues will be $160 million below expected.

Here’s the worst part. Even if spending doesn’t go over budget for the first time in years and rosy resource revenue projections come to pass, Saskatchewan’s debt is still projected to soar. The current government inherited a taxpayer-supported debt of $7.2 billion (not including Crown corporation debt). This year, the debt is projected to hit $7.7 billion and rise to $11.9 billion in 2021.

Both of Saskatchewan’s major political parties need to show stronger leadership.

The NDP rightly criticizes waste and predictably opposes cuts, but Roy Romanow, despite his many tax increases, demonstrated reducing spending is possible and Tommy Douglas made balanced budgets a virtue. Saskatchewan needs an opposition that rediscovers those roots by offering realistic budgeting alternatives.

The Saskatchewan Party brand is built on paying down debt, balancing budgets and lowering taxes. Borrowing has eroded that brand for years, recent deficits have compounded the damage, and after this year’s huge $900-million tax hike, further tax hikes would be fatal. But it’s worth remembering Alberta’s Ralph Klein overcame lower oil prices by reducing actual spending to eliminate the provincial debt and secure a lasting legacy. The Sask. Party must return to its first principles.

Saskatchewan needs to break the cycle of overbudget spending and dependence on ever-increasing oil revenue projections. It will be hard and even unpopular. But it is the task of great leadership.