Higher revenues projected to offset hike in spending
SASKATOON The provincial government maintains it is “on track” to balance the budget despite increased spending, record-high debt levels, a lack of confidence in its resource revenue projections and broad economic uncertainty.
In its first-quarter fiscal update, the Ministry of Finance projected higher-than-expected revenues more than offsetting a rise in spending, allowing the 2018-19 deficit forecast to fall $59 million, to $306 million.
Finance Minister Donna Harpauer, however, admitted the figures are “not really solid” and acknowledged a range of concerns, including international trade pressures, compensation costs and unpredictable resource prices.
“There are definite concerns for our revenues, for a number of reasons,” Harpauer told reporters at a news conference, which was held in Saskatoon to comply with a law limiting government communication during a byelection writ period.
“I’ve seen really strong prices and I’ve seen them plummet overnight … it has been relatively consistent so far, but that can change,” Harpauer added, referring to the province’s $1.6-billion resource royalty revenue stream.
Two major banks have already downgraded their economic forecasts for the province, based in part on the energy sector’s slow recovery, high unemployment rates and the threat to agriculture created by dry conditions.
Three months into the fiscal year, total government revenue is now expected to be $14.4 billion, up $172 million from its budget prediction. The bulk of that, $135 million, is based on higher oil and potash price projections.
Spending is also on the rise. The government is now expected to pay out $14.7 billion this year, up $112 million due to higher interest rates affecting the teachers’ pension plan, health-care “utilization pressures,” and more children in care.
While Harpauer pointed out that those expenses are not optional and the government is not adding new programs, Saskatchewan NDP finance critic Cathy Sproule said they suggest the government isn’t planning properly.
“I think this is a government that is not in charge. I think they’re a government that’s reacting to things around them. There are a lot of external factors that are not in their control, but (the new expenditures show) they ’re not managing well,” Sproule said.
More financial pressure could be on the horizon as the province negotiates new contracts with unions representing thousands of civil servants.
Compensation is the government’s single largest expense, accounting for around half of all expenditures, and the province’s public sector unions have already forced the government to abandon plans to cut wages by 3.5 per cent across the board.
While the Ministry of Finance has scaled back its compensation cuts and now plans to save $70 million over the next two years, the unions have not signalled any willingness to help by taking wage cuts or zero-per-cent increases.
On Monday, Harpauer acknowledged the potential problem, but said the province needs to “keep the negotiation going forward,” while asking each ministry to save money through attrition and measures to control overtime.
Saskatchewan’s debt, meanwhile, is expected to hit record levels this year after the government’s latest budget added $2.3 billion in new borrowing. Total debt is now expected to be $19.9 billion, due to $118 million less in Crown corporation debt.
While the province’s debt-to-gross-domestic-product ratio is among the lowest in Canada and, Harpauer said, lower than it was several years ago, Sproule noted that Saskatchewan’s debt-percapita has “exploded” over the last decade.
Government debt is divided into three major categories: Operating
I think this is a government that is not in charge. I think they’re a government reacting to things around them.
debt, now pegged at $6.2 billion; Saskatchewan Builds capital expenditures, worth $4.2 billion; and government business debt, which will drop to $9.2 billion this year.
While the province’s rising debt has long been a concern for the NDP and others, Harpauer pointed out that business debt is “supported” by Crown corporation revenues, while the capital borrowing is necessary to finance major projects.
Harpauer said the debt that is definitely the biggest concern is the operating debt.
“We are borrowing, or projecting to borrow, within this budget. We still have a deficit. That shows us how critical it is to come back to balance,” she said.
Sproule went further, describing the province’s debt load as “alarming ” and suggesting that between the provincial economy, collective bargaining and borrowing to finance operations, the government has a lot of work to do.