Report questions Crown corporations’ future in Saskatchewan

Crown corporations are involved in a wide swath of life in Saskatchewan, from the smartphone in your pocket to the thermostat on your wall. For many, they’re a part of the provincial identity. But the Frontier Centre for Public Policy (FCPP) suggests they aren’t the wisest of public dollars.

“There’s a lot of money locked up in these companies, several billion dollars, that’s money that could be used for other things that could benefit Saskatchewan,” Ian Madsen, a FCPP senior research fellow said.

These benefits could include areas like paying down some of Saskatchewan’s nearly $18 billion in public debt or hiring more physicians.

Madsen, along with Frank Atkins, co-authored a recently released report, Privatization of Crown Corporations in Saskatchewan, which covers the history of Crowns, privatization in the Grant Devine years and how three performed once privatized; Saskatchewan Mining and Development Corporation (later merged with Cameco), Saskatchewan Oil and Gas Corporation, and Potash Corporation of Saskatchewan (now Nutrien following a merger with Agrium).

The report makes the case that all three saw better financial performance once privatized by contrasting public investment and return against investment and performance on the Toronto Stock Exchange.

“When they are listed on public stock exchanges market discipline helps make them perform better. They invest better, they don’t pay too much for employees or assets, and they’re more careful in how they conduct operations” Madsen said.

Additionally, Madsen said all three saw greater efficiency once privatized.

University of Regina associate economics professor Jason Childs said that should be expected.

“It shouldn’t be surprising that efficiency is going to go up when you privatize something because Crown corporations aren’t chasing efficiency in the same way,” Childs said.

Childs countered that the primary public and private goals are simply different, profit and service. He said that Saskatchewan sees the benefit of both schools of thought through competition faced by Crowns like the Saskatchewan Liquor and Gaming Authority (SLGA) and SaskTel.

“The threat of privatization has done wonders for SaskTel in terms of forcing it to up its game,” Childs said.

“SaskTel was not a great service provider at one point in time and the threat of privatization have improved service immensely to the point where they are potentially a world leader.”

Another argument in favour of Crown corporations is they serve as an additional source of government revenue. Saskatchewan’s Crowns earned nearly $400 million in the 2016/17 fiscal year, an eight per cent return on overall investment. However, Madsen argued that figured is artificially propped up.

“Investment by Crown corporations will have the superficial appearance of being more lucrative, a higher rate of return, but that’s purely artificial because they don’t have to pay taxes,” Madsen said.

READ MORE: Province introduces legislation to repeal provisions of Bill 40

The recent partial repeal of Bill 40, showed people in Saskatchewan are very much in favour of keeping Crown corporations public. Madsen acknowledged this, but encouraged the province to take a more “hard-headed, dispassionate and rationale” look at the issue.

That will likely not happen until at least after the 2020 provincial election. All five Saskatchewan party leadership candidates say they are in favour of keeping Crown corporations publically owned.

Scott Moe did say that he plans to continue to privatize SLGA liquor stores under the 2016 election mandate. Gord Wyant said he would also continue that work if there is a business case to be made.