Saskatchewan’s latest mid-year financial update projects a $250-million deficit, an outcome that would be $1.3-billion worse than the $1-billion surplus predicted in the annual budget.
Finance Minister Donna Harpauer said the swing is due in part to drought that resulted in crop insurance payouts, along with lower potash prices and sales than expected.
“Two large factors outside of the government’s control play into this forecast. The drought was unforeseen, reducing projected crop production by 20 per cent in 2023, when compared to 2022,” Harpauer said.
“Potash prices and sales dropped because potash from Russia and Belarus flowed to large markets including China and India, despite being subject to Western sanctions in response to Russia’s invasion of Ukraine.”
The province has forecasted a $1-billion surplus in the 2023-24 budget released in March. That figure dipped by $485 million in an update provided in August.
Harpauer said despite that large swing, she remains confident in the province’s economy. Saskatchewan ranks second among provinces in projected real GDP growth this year.
“Even considering these impacts, our fiscal picture is solid, more people than ever are living and working in Saskatchewan, and our economy is resilient.”
Harpauer said she is not considering austerity measures or tax increases, because the government already increased the PST and expanded what it applies to, lessening reliance on non-renewable resource revenues.
As for a potential cut to the PST or other taxes, Harpauer said it is too early to make that call.
“It is not likely we could do any tax cuts in this budget, but we are very early in our budget deliberations and we will see where the economy goes.”
Overall revenue is up $35.2 million from the budget’s projections. Taxation saw a $414.7-million increase from budget, with corporate income tax up $289 million and PST up $150 million.
Resource revenues took a large hit, with a $717.8 million decrease in non-renewable resource projections. Potash was the largest factor with a decrease of $552 million. The resource surcharge was also down by $265 million due to lower potash prices and sales.
Potash prices have declined by 28.6 per cent and production is down 5.9 per cent from budget.
Harpauer said listening to the industry, potash prices and sales are not “at the norm” and spikes seen in recent years will not be repeated.
Oil, natural gas and land sale forecasts have all increased from budget.
On the expense side, increases were driven primarily by increased crop insurance claims. Overall expenses are up $1.3 billion from budget.
Crop insurance claims are $853 million of the expense increase. Wildfire evacuation costs totalled $91.4 million.
Harpauer said she wanted to be clear that the increase in crop insurance is not being “attributed to producers.”
Pension inflation adjustments in education and general government added $315.9 million to the expense projection.
Opposition questions regular deficits
The Opposition NDP said the new budget projection shows the Saskatchewan Party government has had one surplus budget in the last nine years.
“Scott Moe has lost all credibility when it comes to managing taxpayer dollars. Once again, they’ve squandered a boom,” Opposition Leader Carla Beck said.
“They aren’t focused on the right priorities. They’re jetting off on a million-dollar trip to Dubai and massively overspending on MLA-owned motels.”
When asked Monday about the yo-yo from $1-billion surplus to deficit, and other deficits over the last few years, Harpauer pointed to “extreme events.”
“We were looking at a pandemic, which of course brought the fiscal position of the province down because the economy was slowed down,” Harpauer said. “Then we had it bounce back because of global unrest and that’s when our resource revenue bounced up to extreme levels, and then we had the largest or the most catastrophic drought which brought it down again.
“Those are all extreme events which create swings in the budget.”
Beck said the government has not spent wisely during the swings.
“Instead of growing the economy, they’ve become more and more dependent on hiking taxes and costs on the people of Saskatchewan during an affordability crisis. We’re all paying more to cover the cost of their mismanagement.”
Source : CBC