Around this time in November, the provincial finance minister traditionally provides the fall budget update, letting the people of Saskatchewan know how well we are doing. That update is coming soon, but on Nov. 16, we got a preview from Finance Minister Kevin Doherty.
It was not good. If Saskatchewan was a patient, they just heard that not enough blood circulation is getting to all parts of the body, and it looks like some toes are going to have to be amputated. It might even be a whole foot.
Revenue for this fiscal year is expected to be down $600 million. Less taxes coming in and less royalties from non-renewable resources are the culprits. While their US$45 per barrel WTI projection is holding, potash and uranium are hurting. I wonder how large an impact we will see the lousy weather had on harvest in much of the province.
“What that reflects is we have lower income tax coming in, lower corporate tax, fuel taxes are down, consumption taxes – that being the provincial sales tax – are down,” Doherty explained, as reported by CJME.
“All combined, our forecast right now is down about another $400 million in this fiscal year since I brought out the budget on June first.”
Since Doherty’s not going to raise taxes this year, cuts will be the order of the day. But for the next fiscal year, nothing is off the table.
In the past several years, the Saskatchewan Party government has been continually preaching it is looking for internal ways to cut back expenditures. From the people I interact with, I’ve noticed it in substantially reduced travel to conferences, for instance. For some reason, our son is not getting nearly as much speech therapy assistance as he used to. Could that be cuts, a personnel issue or both?
Large-scale cuts are something we haven’t really seen in the last 20 years. But we most certainly did see them in the 1990s, when the Roy Romanow NDP government cut everything possible to straighten out our province’s deficit-stricken finances.
When my eventual wife graduated nursing in 1997, they laid off 600 nurses that year. It took her a year to find work as a registered nurse. Times were tough. A few years later, things turned around. When my sister, Melanie, graduated nursing in 2001, she could find work anywhere, and got a signing bonus when she did hire on at Saskatoon City Hospital. Times had changed.
Since then, I have not heard of any nursing layoffs in Saskatchewan until a few months ago. Some nurses were laid off in Regina.
And that’s my point. For the last several years, the premier and his finance minister have been preaching restraint and attrition. But there’s only so far you can go with that. Now, I fear, 2017 will be the year “cutbacks” returns to the Saskatchewan lexicon in a big way. Increased taxes might be next.
There’s a simple solution to this problem: magically make oil go back up to US$100 per barrel for WTI, and that deficit vanishes. It would make about a billion dollar difference in our finances. But unless you have an inside track with the Saudi king and/or oil minister, don’t bet on it.
The 2013-14 budget, before the oil crash, oil was expected to bring in $1.441 billion. For the 2016-17, it was $509.7 million.
Otherwise, probably the easiest, single thing the province can do is increase the provincial sales tax. At $262 million for each point on the sales tax, you would need almost three percentage points to roughly make up the deficit, and four if you wanted to make up the oil shortfall. That’s based on the 2016-17 budget, released in March, anticipated $1.312 billion on a five per cent PST.
Sure, dramatic increases in potash could make the difference. Uranium would help. But it’s oil that really makes the difference.
For the last two years, the oil downturn has hurt primarily the oil patch areas of the province. Now its impact will be felt by everyone.
— Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.
