Saskatchewan’s fiscal outlook is looking stronger in the first quarter update than the budget projections, with a reduced deficit outlook and decrease in record high public debt.
The projected deficit for the end of the fiscal year is now $306 million; a reduction of $59 million from the original $365 million projection in April.
Revenue received a $171.5 million boost, primarily driven by better than expected prices for both oil and potash. Because of this, the budget projection for the price of oil has jumped from US$58.18/barrel to US$68.03/barrel. The price for potash has also been adjusted accordingly.
Finance Minister Donna Harpauer said the province is still being cautious with revenue as there are many economic unknowns; particularly south of the border.
“There’s a lot of trade uncertainty right now with the NAFTA agreement, as well as the tariffs, which will affect our economy. We also have concerns about tax competitiveness; the U.S. has made some major tax changes,” Harpauer said.
Despite uncertainty, University of Regina associate economics professor Jason Childs believes upping the projected price of oil is a good move.
“I think a revision at this point is not a bad idea. We’ve seen prices rise and stabilize above $65 per barrel. I don’t think it’s been below $65 a barrel for quite some time now,” he said.
Government owned business revenue also climbed $36.2 million, bolstered by a $30.6 million increase in SaskPower revenue, driven by sales to large customers and increased exports and trading activity with Alberta.
Crown revenue was offset by decreases of $10.5 million and $7.5 million in SGI and Saskatchewan Auto Fund revenue respectively. The Finance Ministry attributes this to higher summer storm claims.
The cost of running government also went up, as expense projections climbed $112.3 million.
Education saw the biggest increase, primarily driven by pension expenses like the Teachers’ Superannuation Plan. This line item saw expenses balloon to $65.9 million.
The cost of health is being bumped up $20 million due to increased utilization pressures across the entire Saskatchewan Health Authority.
Social services also had a $20 million expense increase. This is attributed to caseload increases in child and family services.
The Environment Ministry saw its expense forecast go up $17 million due to increased forest fire operations.
Harpauer said she feels these added costs are not optional, since they are centered on providing services citizens expect and are not adding new programs.
Public debt has been growing since 2009, with this year’s budget project originally set at just over $20 billion. Following the first three months of the fiscal year, Saskatchewan’s debt load has been reduced by $118.4 million. The new debt projection is $19.9 billion.
Harpauer said the province’s $6.15 billion operating debt is the biggest concern, but said it has proportionally shrunk in the past decade. She said this figure represents 7.5 per cent of GDP today compared to 13 per cent in 2008.
The Crown entities that saw the biggest decreases to their debt were the Saskatchewan Health Authority, $31.4 million, SaskPower, $38.4 million, and SaskEnergy $40 million.
Finance critic Cathy Sproule took aim at the fiscal update, particularly debt, in saying this report does not prove the Saskatchewan Party plan is working.
“The Sask. Party has done nothing to improve the province’s financial position. Natural resource revenues and the Crowns are boosting the economy, but only marginally. The province’s debt is still on track to increase to nearly $20 billion,” she said.
“Health services and social service utilization are also up from the budget, which means once again the Sask. Party is failing to ensure these important services are available. The government can claim they are working hard to fix their mistakes, but so far there is no proof in this report that their efforts are succeeding.”
Childs said that as interest rates show signs of changing it is important to work to get debt under control.
“The Bank of Canada’s raising rates already this year. That’s going to start to cost us more and more money. Dealing with that debt is a good strategy,” Childs said.
“It gives us room next time we get hit by a recession, it gives us room to maneuver and gives us financial firepower.”
The province says they remain on track to balance the books by the end of the 2019-20 fiscal year, and remain optimistic heading into the in-depth midyear financial update this winter.