The Saskatchewan government released is first-quarter report Thursday, announcing that its projected surplus has been cut in half — more than $500 million — for the current fiscal year.
An economics professor says that shouldn’t come as a surprise.
Several factors are playing into the decrease, which saw the $1-billion surplus projected in the 2023-24 budget fall to $485.5 million, said Jason Childs, an associate professor at the University of Regina.
Childs noted it’s nice to see the province still in a surplus position, but said Saskatchewan has faced some economic headwinds and that data out of Europe shows more headwinds are coming our way.
“This isn’t entirely unexpected, but there’s some good news and some bad news.”
Part of the issue, Childs said, it that it’s difficult to nail down economic forecasts, particularly when it comes to natural resource revenue.
“Those things move so much and so quickly. So oil prices can swing really wildly, and if you’re off by a dollar in your forecast that’s going to take a big bite out of your budget.”
A $528.9-million decrease in non-renewable resources revenue — largely due to lower prices and sales of potash and oil — is considered the main culprit behind the drop in the overall revenue forecast, the province said in its report.
Childs said the invasion in Ukraine is affecting prices for commodities such as potash and oil, noting the other big players in potash production are Belarus and Russia.
Childs addressed the concern that there was no cost of living relief coming to Saskatchewan residents in the budget, saying as long as governments keep stoking demand without seeing supply increases to meet it, prices will only be driven up.
“It’s one of those really challenging things to navigate because on the one hand you do want to help people out, and as a government you sort of have that responsibility. On the other hand, you don’t want to exacerbate the problem.”
When asked whether or not he expects future tax hikes, Childs said it depends on what the government is doing with those hikes.
He said if the government is anticipating a downturn, raising taxes on consumption could help build a tax base to support services.
“And if you’re anticipating increases in expenditures in the future, such as health-care, such as education, that revenue has to come from somewhere.”
He said it wasn’t that long ago that the provincial government missed the mark on its forecast for potash by $1.8 billion, saying that’s not a situation governments want to be in if they can avoid it.
Trent Wotherspoon, the Saskatchewan NDP finance critic, took aim at the Q1 report, saying the lack of cost of living relief compounded by increased costs and taxes was inexcusable.
“Saskatchewan people have been taking the rising costs of gas, groceries, additional PST and power bills square on the chin for months,” Wotherspoon said.
He said that government coffers are filled with windfall revenues and additional PST.
Wotherspoon said the response from the province is worse than nothing, pointing to three increases in power bills within the last year.
“This hurts families, this hurts jobs, this hurts our economy, and we can see that through the 5,200 jobs lost since the start of this year.”
Wotherspoon said building permits are down 19 per cent this year, and says this is directly linked to the choices of the Saskatchewan Party government.
Finance Minister Donna Harpauer said on Thursday the province was still on track to use $1 billion to cut operating debt.
“Saskatchewan’s finances continue to be in a strong position, with a substantial surplus,” Harpauer said. “The forecast, however, clearly demonstrates the need to be prudent and manage spending carefully, as resource revenue is volatile and forecasts can change quickly due to global impacts on prices and production.”
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