Despite financial pressures, Sask. surplus remains on track

Despite a difficult harvest, the Saskatchewan government’s projected surplus remains on track.

The mid-year financial report shows an estimate of $37.4 million in the black, actually up $3.0 million from what was forecast in the budget in March.

Finance Minister Donna Harpauer said Thursday she does get some satisfaction from seeing the surplus rise.

“It’s still pretty narrow, and so there’s so many risk factors because there’s an enormous amount of variables within each and every budget and each budget’s unique,” she said. “So, yes, I am pleased that we are where we are. I will be more comfortable and sleep better at night if that was even stronger.”

At mid-year, revenue is forecast to be $15.4 billion — an increase of $329.3 million, or 2.2 per cent, from budget. That’s largely due to higher federal transfers, non-renewable resource revenue, and net income from Government Business Enterprises (GBEs) — including SGI’s Auto Fund and the Workers’ Compensation Board — combined with smaller increases in taxation and other own-source revenue.

The province has been slowly moving away from a budget based mostly on resource-based revenue to one more based on taxation, some of which has been borne by taxpayers in things like the higher and expanded PST.

Looking at the mid-year numbers and seeing the continued expectation of a surplus, Harpauer said the first thing she had to say to people is “Thank you.”

“I think the citizens of the province have … been very understanding that we need revenue in order to sustain into the future services that they also want and expect from our government to deliver — and that’s in health care, education, and social safety nets,” said Harpauer.

Though there is expected to be some money left over at the end of the year, Harpauer said she doesn’t think things are strong enough for any kind of broad change, like a lowering of the PST.

“As long as we have the challenges in our trade markets and we can’t get our oil products to port, it will be here for a while,” she said of that tax. “If any of those loggerjams per se lift, I think our province is poised to see extreme growth once again, and not as slow, and that’s when it’s going to be revisited.”

Looking at the numbers in Thursday’s report, spending is going up as well as revenues. Expenses are forecast to be $15.3 billion, an increase of $326.3 million (or 2.2 per cent) compared to the budget.

A $285.2-million non-cash increase in pension expense accounts for nearly 90 per cent of the increase. That is an increase in the value of the government’s pension liability, mostly for the two closed defined benefit pension plans.

Because they’re closed, the province has to expense any increase or decrease immediately, which can move the budget around a lot. The province is trying to get rules around that changed so it can have more flexibility and a little more predictability in budgeting.

Much of the remaining increase in expenses is due to pressures in the health system — higher use and investments in getting surgical wait times down — and federal flow-through funding for infrastructure, partly offset by lower debt-servicing costs.

Public debt at March 31, 2020 is forecast to be $302.1 million lower compared to budget. The decrease is largely due to decreased debt at SaskPower.

Net debt at March 31, 2020 is forecast to be $12.0 billion, a decrease of $370.3 million from budget. The province’s net debt, as a percentage of GDP, is forecast to be among the lowest in Canada.

The government went through several austerity measures the last few years, including an increase and expansion to the PST in order to get back in the black.

Looking ahead, Harpauer said there are several things her ministry is keeping an eye on that could affect the numbers for the rest of the year. Those include oil prices, the value of the Canadian dollar and interest rates.

Global trade is also being seen as a risk to the province’s bottom line. Many of Saskatchewan’s major trade partners are seeing their GDPs go down. Harpauer said the trade dispute between the U.S. and China could have a big impact on the province as well.

“I am very, very optimistic in our decision to basically look after ourselves and ramp up our own reach out to countries on the trade side,” she said. “I’m hearing that it’s very well-received, but it will take some effort because it’s building relationships, largely, with the different countries and their different cultures.”

There are a few negatives in the numbers: Housing starts and retail sales are down from what was projected, and where the province projected a real GDP growth of 1.2 per cent this year in the budget, now it’s projecting just 0.6 per cent.

Short-term measures, long-term pain

The opposition NDP is concentrating on what is not in the mid-year update — more spending.

Finance Critic Trent Wotherspoon said there isn’t any new money to fix the problems with overcrowding and complex classrooms.

“Nor do we see a single new dollar to go at the harsh reality that many are facing by way of suicide (or) addictions within our province,” Wotherspoon said. “Not a dollar to address that crisis on the suicide front, to fix our mental health supports, or to step up to the crystal meth crisis that is ravaging the lives of so many.”

With what Wotherspoon calls a deficit in those areas, he said the government saying it has a surplus is a bit of a charade.

He believes the province needs to put money in the right places, and if it doesn’t: “It’s going to put our finances in huge jeopardy in future and of course it’s going to cost people in their quality of life or possibly their life itself.”

Wotherspoon acknowledged it would take money to do what he said was needed.

“We, and I, very much support fiscal prudence and making sure you have sustainability to your finances,” he said. “But where we’re at right now and because of the choices of the Sask. Party, and the hole that we’re in, the deficit in our classrooms, we need those investments right now. Certainly that could grow the deficit here this year, but those are dollars that are needed.”

Wotherspoon also pointed to negative numbers in the report that he said show the economy is hurting and the government is failing its people.

Retail sales forecasts are down in Saskatchewan from the budget, as well as manufacturing and construction activity, and real GDP growth is now projected to be half of what was projected in the budget.

“That reflects the hard reality that people are facing on the job front and that businesses are facing,” Wotherspoon said.