Saskatchewan budget plan remains on track despite oil challenges

The Saskatchewan government’s plan to return to a balanced budget remains on track, despite some hiccups since the first quarter fiscal update.

The new deficit projection is $348.3 million by the end of the fiscal year. That’s a $17 million decrease from the original projection in the spring budget. However, it’s a larger deficit than the first quarter (Q1) update projection, $306 million in August.

“The oil projection difference from Q1 to now is $88 million difference, so that would probably be the largest factor in that shift,” Finance Minister Donna Harpauer said.

The forecast annual average price for oil is $65.23 million USD/barrel. The annual cost differential for the Canadian price is 31.7 per cent of the American value.

Despite the differential, oil and gas revenue is expected to increase $18 million to $718 million this year. In the first quarter update, oil and gas revenue was expected to top $805 million.

Overall, non-renewable resource revenue is expected to rise an additional $109.4 million from the original budget projection. This is mostly attributed to an expected $126.8 million increase in potash royalties due to rising prices.

Total non-renewable resource revenue is expected to be $1.59 billion for the fiscal year.

Harpauer added that expenses have gone up in a number of ministries, attributing to the modified deficit projection.

“You will note that our expense from Q1 is very modestly increased, because in Q1 we recognized some utilization pressures in both health and social services. We only have a few million in expenses we feel will be pressures,” Harpauer said.

Spending in health and social services are up $20 million and $23 million respectively from budget. Education saw a $65.9 million expense increase primarily due to changes in the teacher’s pension. The protection of personal property budget increased $10.4 million. This is to cover increase demand for court services, in custody services and the Provincial Disaster Assistance Program (PDAP).

“That to me is exactly what we’ve been saying is that this austerity approach will end up costing more in health, social services and justice. That is coming home to roost,” Opposition Leader Ryan Meili said.

Meili also took issue with what he described as the province minimizing the impact of PST changes enacted in 2017. These include raising it from five to six per cent and applying it to previously exempt areas like children’s clothes, restaurant meals and construction labour.

The midyear update says housing starts are down 28.6 per cent, and non-residential construction fell 8.6 per cent.

“There’s been a big impact on the construction industry and that has spill over and impacts in other industries,” Meili said.

From the initial budget forecast, total revenue is expected to rise $138.1 million to $14.38 billion, and expenses are up $121.1 million at $14.7 billion, resulting in the $348.3 million deficit projection.

Harpauer said the province remains on track to table a balanced budget next spring, completing the province’s three year plan to return to balance.

Debt

The province’s record high debt is also seeing positive movement. At the start of the fiscal year, debt was forecast at $20 billion. It has now dropped $251 million to $19.8 billion.

This is primarily driven by reduced debt in SaskPower and SaskEnergy, $139.6 million and $72.7 million respectively.

SaskPower’s debt reduction is attributed to the Chinook Power Station’s construction near Swift Current coming in under budget and the deferral of capital spending at Boundary Dam near Estevan.

SaskEnergy saw stronger than expected earnings last year, among other factors (reduced capital spending) contributing to its lower debt load.