Report indicates need for change

Not three months have elapsed since provincial Finance Minister Ken Krawetz presented a mid-year financial report that projected surpluses in both the general revenue fund and Saskatchewan’s summary financial statements, but he has been forced to dip into the government’s “rainy-day” account to maintain the façade of a “balanced budget.”

Even putting aside the entirely legitimate concerns that have seen the provincial auditor issue an adverse opinion on the veracity of GRF figures and the minister moving money in and out of the so-called Growth and Financial Security Fund to paint a rosy financial picture that’s politically expedient, the third-quarter numbers presented Friday were no Valentine’s Day present.

They show that revenues are down a whopping $110.3 million from the mid-year update, and $144 million off budget projections. While it’s been clear for some time that a downturn in the potash market would hit Saskatchewan hard, the $72-million decline from the mid-year estimate for the mineral has been joined by a slide in oil revenues of almost $74 million. Had it not been for the mitigating impact of the loonie dropping by almost two cents since November, the impact from oil would have been even greater.

From Mr. Krawetz’s original budget for 2013-14 that forecast a modest GRF surplus of about $65 million, the projection now is for a deficit of nearly $128 million. To enable the government to boast of a “balanced budget” at year end, the minister is transferring $135 million from his rainy-day account to record a minuscule surplus of $7 million come April. This, even though most government ministries, including Health, are collectively spending $90 million less than budgeted.

These numbers likely provide some context to recent musings by Premier Brad Wall about the possibility of raising and converting education property taxes to fund infrastructure projects, and even his politically mischievous attempt to force NDP Leader Cam Broten to agree to the sale of two Crown-run casinos to the Saskatchewan Indian Gaming Authority.

While the government still expects a $400-million surplus in Saskatchewan’s summary financials, that’s down from $467 million projected at mid-year. The weak third-quarter numbers during a period of relatively strong economic performance in Saskatchewan point to the need for the government to adopt sound taxation policies that can help wean Saskatchewan’s over-reliance on the sale of raw material.

Mr. Krawetz was right Friday to acknowledge the volatility of the resource sectors. However, to meet the fiscal challenges prudently and responsibly, as he suggests, will require the government to more than manage its spending.

While that’s important, the government needs to show political leadership by carefully examining its royalty and tax structures in order to meet the needs of a growing and diverse population in Saskatchewan, and balancing the province’s current financial requirements with the need to establish a sovereign wealth fund for the benefit of future generations.

Mr. Wall’s musings about an education property tax hike suggests he’s not entirely averse to the notion. It’s a sensible first step toward rethinking Saskatchewan’s financial makeup to make it less vulnerable to the vagaries of markets it cannot control. The editorials that appear in this space represent the opinion of The StarPhoenix. They are unsigned because they do not necessarily represent the personal views of the writers. The positions taken in the editorials are arrived at through discussion among the members of the newspaper’s editorial board, which operates independently from the news departments of the paper.