Time to rethink deficit budgets?

It still might be heresy to suggest Saskatchewan has become too deficit-obsessed. Because of the utter waste of the Grant Devine Progressive Conservatives of the 1980s, Saskatchewan is still shelling out $340 million a year in finance-debt servicing costs to pay for Tory debt.

So perhaps it’s a good thing that Premier Brad Wall’s Saskatchewan Party, which emerged from the ashes of the old PCs, views deficits as bad things. “Budgets are a reflection on the priorities of a government,” Wall said in Thursday’s budget speech debate. “We have to balance the budget. We have to make sure we are not borrowing some future generation’s money.”

But might our government’s obsession with balanced General Revenue Fund (GRF) budgets be affecting its ability to make wise decisions? Well, a couple of decisions emerging from Finance Minister Ken Krawetz’s 2013-14 budget makes one wonder whether this silly “balanced budget” game might be producing poor decisions.

The first issue is flood preparation — invisible as a line item in the actual budget, but one the government says will receive $182 million from the Growth and Financial Security Fund (GFSF).

Of course, Government Relations Minister Jim Reiter argues that you can’t really have a budget line item for unforeseen disasters like flooding — a dilemma that plagued past governments as well.

The NDP administration once had a forest fire-fighting contingency fund, but dropped this annual budget line item because it was just too difficult to predict such annually occurring “disasters” ... especially, in tight budget years. (It’s also worth noting that the Sask. Party Opposition vigorously complained about this — suggesting it once found it easier to predict lightning strikes causing forest fires than the annual spring melt.)

It’s also important to understand that, unlike the NDP’s Fiscal Stabilization Fund, the Sask. Party’s GFSF does have cash assets ... albeit assets not designed for operational expenses. For that reason, it would seem unlikely civil servants could make the correct preparatory work choices — making sure culverts, ditches, floodways, etc., are cleared to prevent costly flooding — without a proper budget from which to work.

So why no line item for flooding expenses? Well, if it was a line item, that $182 million would have had a big impact on the 2013-14 budget surplus. Instead of a $64.8-million pre-transfer surplus or a $32.4 million GRF surplus after transfers, Krawetz either would be presenting a deficit budget or would have required a much bigger GFSF transfer. That would have made last week’s budget look much weaker.

It will be very sad if it turns out we’re not ready for a fast spring melt because the Sask. Party is more concerned about presenting a balanced budget.

Unfortunately, this surplus-budget shell game extends well beyond paying for potential flooding costs. This takes us to the second questionable budget choice, which is also about keeping up the appearance of a surplus — the use of public-private partnerships (P3s) for mundane capital projects like hospitals, schools and overpasses.

Already, we’ve seen the Sask. Party government off-load capital expenditures onto the universities’ budgets, and privately built and run nursing homes that — by all measure — appear more costly. In fact, so good is Saskatchewan at “balancing the budget” that overall debt has increased by nearly $2 billion in the last two years — largely because of heavy spending on infrastructure by the Crown corporations.

In fairness, we do need to catch up on our infrastructure. And we shouldn’t automatically discount P3s that might be right for some capital initiatives. But is the P3 build-now-and-pay-more-later model the right approach? Or is this another case of finding a way to balance a budget now and pay for it later?

Should we instead consider something like Saskatchewan “building bonds”, where — for an tax credit on investments — we could better raise capital for such needs? With interest rates expected to rise and with the government’s high credit rating, wouldn’t this be a better long-term strategy?

Or is there a fear that a Saskatchewan bond initiative would show up on the books as debt, discounting it as a choice?

Yes, deficits are dangerous. But getting more clever at hiding them isn’t the solution.

TROY Fleece/leader-post files With the prospect of flooding ahead of us, was it wise for the province to not budget anything for fighting, and preventing, problems?