Gov’t missed opportunity on wealth fund
The Saskatchewan government’s failure to act on a three-year-old report recommending the establishment of a sovereign wealth fund is a “real missed opportunity,” according to the interim leader of the Opposition NDP.
“It’s frankly unacceptable that we’ve come through a decade-long period of record revenues without having any long-term savings,” said Trent Wotherspoon, who was appointed interim leader of the Saskatchewan NDP in April.
In 2013, Premier Brad Wall commissioned former University of Saskatchewan president Peter MacKinnon to investigate sovereign wealth funds — large investment vehicles funded by profits from natural resource extraction.
MacKinnon’s report, entitled A Futures Fund For Saskatchewan, recommended that the government cap its use of resource dollars at 26 per cent of total revenue and put the remainder into a newly established sovereign wealth fund.
This “pragmatic” solution was based on the average resource revenue for the years 2009 to 2014, and would allow the government to build a sizable fund without significant shock to its revenue base, MacKinnon said in an interview.
“Well-invested and properly protected, it would produce ongoing revenues for the province which would augment its revenues from taxes and other sources.”
Saskatchewan has experimented with sovereign wealth funds before. In 1978, Allan Blakeney’s New Democratic government established the Saskatchewan Heritage Fund with an initial deposit of $465 million. According to MacKinnon’s report, that fund was intended to take in 100 per cent of resource revenues but “few formal controls on spending” led to its failure. It was abolished in 1992. If properly managed, a new Saskatchewan fund could be similar to Norway’s Government Pension Fund Global, MacKinnon said. Established in 1990, the Norwegian fund is currently worth about US$1 trillion, with average annual returns of about four per cent.
The provincial government has not followed through on the recommendations in MacKinnon’s report, which outlined a fund designed to achieve “a maximum rate of return over the long-term without undue risk of loss.”
Wotherspoon said the Saskatchewan NDP has long advocated for the creation of a sovereign wealth fund, and it’s disappointing that MacKinnon’s report has been sitting on a shelf for the last three years.
“I think there’s different ways, and some reasonable discussion, to establish what the best way to fund it is, and what thresholds are in place, but the principle is very important,” the MLA for Regina Rosemont said.
On Friday, Finance Minister Kevin Doherty defended the 2016-17 budget, which projected a $434 million deficit, due in part to extremely weak oil and potash prices creating a $1 billion shortfall in resource revenue.
“(In) this year’s budget, non-renewable resource revenue will represent 11 per cent (of total revenue), so we’re nowhere near that point Dr. MacKinnon recommended,” the finance minister told reporters.