Deficit not the biggest relative to economy

Saskatchewan’s 2020-21 budget shatters the record for highest deficit in provincial history.

Compared with actual figures from past fiscal crises, the $2.4-billion deficit projected on Monday is roughly double the actual shortfall of $1.2 billion in 2016-17. It is about $900 million more than the $1.5 billion shortfall recorded in 201516, as the last oil crash began to bite into provincial finances.

Those deficits prompted a threeyear return to balance that began in 2017-18. It included sales tax increases approaching $1 billion, cuts to municipal transfers, the elimination of STC and generally unsuccessful attempts to claw back public sector salaries.

Finance Minister Donna Harpauer is now promising a three- or four-year plan to return to balance, but she is not yet able to provide details and cannot commit to doing so before the election expected in October.

But Monday’s deficit, while record-breaking in absolute numbers, falls short of an earlier fiscal crisis in Saskatchewan by arguably more important measures.

In 1986-87, Grant Devine’s Progressive Conservative government ended up $1.2 billion in the red, according to actual figures in public accounts.

That $1.2 billion would be worth a lot more today, however. After factoring in inflation using the Bank of Canada’s formula, that would clock in at $2.5 billion in 2020 dollars.

That’s comparable with the current number.

But the Devine shortfall in 198687 was far larger than Saskatchewan’s current deficit compared to the size of the provincial economy, which was valued at $18.5 billion in 1987. The provincial deficit was about 6.6 per cent of that figure, and several years of further deficits followed.

The deficit projected for 202021 is about three per cent of Saskatchewan’s roughly $80 billion economy.

The reckoning for the fiscal mess during Devine’s second term came by 1990-91, when the PC’S announced tax hikes, public sector layoffs, frozen grants and deep cuts to multiple government departments.

The NDP later introduced a “Balanced Budget Plan” that meant years of fiscal austerity to rescue a province near bankruptcy.

Those governments under Roy Romanow took tough measures like closing community hospitals that continue to rankle to this day.