Contingency fund empty as deficit projections drop

Saskatchewan’s finances remain “on track” to get back to balance, but all of its contingency money is gone.

According to the province’s mid-year financial update released Wednesday, the 201718 budget deficit projection is $679 million. That is $6 million less than what was estimated in March’s budget.

A $300-million contingency fund built into the budget as justin-case money will cover the cost of $250 million worth of compensation savings the province budgeted for in March but failed to achieve.

The province is asking public-sector workers to agree to a 3.5-per-cent compensation rollback.

“Right now, we’re not even remotely close in savings,” said Finance Minister Donna Harpauer said.

The three-year back to balance budget plan still calls for the compensation savings, but the province is now forecasting it won’t achieve the target this fiscal year.

Harpauer admitted the $250-million savings plan was “definitely a risk in our budget because we knew it would be hard to achieve.”

NDP finance critic Cathy Sproule said the province running out of its contingency money was “kind of predictable.”

Taking that risk — and coming out on the losing end — means the $300 million in contingency money is all spent, with four months to go in the current fiscal year.

Adding to the province’s financial woes is a decrease of $53 million in projected revenues.

Much of that is due to an overall drop in projected money coming in from taxes.

Despite increasingtaxesbynearly $1 billion in the budget, the revenue expected to be generated from that increase is down $181 million since March.

An increase to and an expansion of the provincial sales tax (PST) were introduced, including removing the exemption on construction materials, but because alreadyin-place construction contracts were grandfathered, the increase did not apply in all instances. The province estimates it could have brought in $95 million more had the exemption been removed immediately.

A similar situation took place with insurance for agricultural producers, dropping projections down about another $25 million.

“It’s a little bit lower than we projected because of the timing of how it applied to insurance as well as the grandfathering of construction projects, so it’s still a significant contribution to this particular revenue (item),” said Harpauer, who pointed out total taxation revenue is still projected to be about $245 million more than the previous year.

Sproule said that the province should have been better prepared when it announced the changes to the PST.

There are signs of optimism in the non-renewable resource sector sprinkled throughout the government documents outlining the mid-year finances, such as increased drilling activity and higher production.

But very little of that positivity is being seen in actual revenue projections, which is now expected to drop $24.1 million and generate about $1.4 billion.

“The optimism in the oil industry in particular is … the considerable increase in the number of wells that are being drilled,” said Harpauer.

While the volume of oil being produced is positive, its selling price is less so.

The price of WTI oil was projected to be $56.25 per barrel in March, but has now been dropped to $50.25.

Such volatility in the non-renewable resource sector is one reason why, according to Harpauer, the province is “trying to shift our finances toward something more stable” in the form of increased revenue from taxes.

“What we’re seeing here is a government that is not making any headway at all on a $650-million projected deficit, and that’s disappointing,” said Sproule.