The Saskatchewan Government said the province is on track to meet its three-year promise to return to a balanced budget, projecting a deficit of $365.3 million for 2018-19 and a modest $6 million surplus the following fiscal year.
Spending was forecast to drop by 1.4 per cent, or $200 million, in 2018. This comes largely due to a $404 million reduction in pension costs and attrition, a $340.6 million reduction in capital investment, and $70 million in savings across the public sector over two years. There were no layoffs included in the budget.
“We are still on track to balance," Finance Minister Donna Harpauer said. "We are very, very optimistic that the economic indicators are showing growth."
The province's long-term debt was forecast to increase by $2.3 billion, bringing the total to $20 billion. The province made the decision to pre-borrow $600 million, as interest rates are projected to increase. Around $400 million comes from operating debt. The province's debt-to-GDP ratio was forecast to hit 26.1 per cent, third lowest among provinces. Only Alberta and British Columbia are lower, with 14.3 and 25.6 respectively.
The provincial GDP is expected to grow by 1.3 per cent this year and 2.5 per cent in 2019. The province said the ten-month suspension of operations at Cameco's McArthur River uranium mine, which started in January, has significantly reduced uranium production and dampening GDP growth.
Revenues in the province were forecasted at $14.2 billion, up 0.6 per cent or $80 million over last year. This was due to an uptick in oil and potash prices, but despite the increase, non-renewable resource revenue, forecasted at $1.5 billion, is still $1.1 billion lower than 2014-15 levels. The province budgeted oil at US $58.18 per barrel and potash at US $191 per KCI tonne. The province based their estimates on a number of private industry forecasts.
The province is only relying on non-renewable resource revenue to account for around 10 per cent of revenues, down from a high of 32 per cent.
“I think that is what is going to be the stabilizer to take us into balance next year,” Harpauer said. “Last year's budget was difficult, as it began the shift from our over-reliance on resource revenue to a more stable source of revenue. There was difficult decisions, but we are seeing the benefits of that decision in this budget.”
Taxation revenue was projected to be down, but offset by a broadening the provincial sales tax (PST).
The PST exemption on used light vehicles is being removed April 11, and will align the province with other jurisdictions in Canada. The exemption for Energy Star appliances is also being removed. The cost savings that come with energy efficient appliances is already a strong enough incentive to buy, according to the province.
The trade-in allowance is being reinstated, meaning PST will only be paid on the difference in price between the trade-in and the purchased vehicle. PST will not be charged for a used vehicle given as a gift between family members or the private sale of a used vehicle under $5,000, something unique to Saskatchewan. Harpauer said an exemption was selected over a deduction for the used private vehicle sales, as it applies to any and all vehicles.
Despite ample tweaks to PST over the past two years and introduction of other municipal surcharges, Harpauer said she does not fear taxpayer fatigue or worry it will scare aware investors.
“When you look at the basket of taxes we actually, comparatively speaking, are still low,” she said. “We felt this was one area that wasn’t going to affect the economy. Investors looking into our province aren’t going to look at whether or not there is PST on used cars.”
Notably, the budget did not introduce a carbon tax. There were no increases in tax rates, however the province has paused its promise to roll back the personal income tax rate by half a point and is reintroducing tax bracket creep. No date was set to reverse those changes.
Education - Up $30 million to $1.87 billion
Premier Scott Moe ran for leadership of the SaskParty on a promise to restore $30 million to education funding. This promised was fulfilled, but still left education funding shy of 2016 levels.
There was $20.8 million in new funding from the federal government through the Canada-Saskatchewan Early Learning and Child Care Agreement to support more than 16,000 licensed child care spaces in the province and for the addition of 2,500 more by 2020. Over $76.4 million was allocated to school maintenance and capital.
Harpauer said despite large cuts to funding last year and levels remaining flat this time around, the province will “be watching closely as enrolment increases as that is a pressure that school divisions have seen in the past."
Advanced Education - Up 1.5 per cent up to $729 million
Operating grants to post-secondary institutions were maintained at last year levels. The ministry as a whole will see an $11 million increase to $729 million, including $18.2 million for a successful College of Medicine.
Policing and Justice
Rural policing is taking centre stage.
The government is providing funding to the Protection and Response Team, which was launched last summer. The budget also included $4.9 million in new funding from SGI for enhancements to the provinces rural crime strategy. This included 30 positions for the provinces Combined Traffic Safety Services Unit.
Spending on police and justice was up 7.2 per cent, or $690 million. This included a $13.6 million increase for RCMP contracts, $11.4 million in new funding to operate the province’s correctional facilities and a $4.4 million increase directed towards court services.
Health - $5.77 billion, up 2.5 per cent
Saskatchewan will save over $19 million through the amalgamation of its twelve health regions last fall, mainly by way of administrative costs, and the province says those funds can be redirected to frontline care. The Saskatchewan Health Authority (SHA) will see a $71.87 million funding boost.
The province is also spending $700,000 to fully cover HIV drugs for patients. Currently, it only covers 91 per cent.
Another $16.8 million was earmarked for the Jim Pattison Children’s hospital. The province is also investing $34 million to complete construction of the new Saskatchewan Hospital in North Battleford, which is expected to open this fall.
Additional federal and provincial funding of $11.4 million was pegged to cover new mental health supports and services for addictions and youth. The budget earmarked $2.8 million for a new program aimed at individualized funding for children with autism spectrum disorder. $4,000 per child will be provided in 2018-19 for those under the age of six.
A new universal newborn hearing screening program will receive a $523,000 investment.
New incentive programs
The budget introduced a Saskatchewan Value-added Agriculture Incentive for corporations making a minimum capital investment of $10 million in an eligible project. Projects must upgrade or transform raw or primary agricultural products.
The province is also looking to support technology companies through the Saskatchewan Technology Start-up Incentive. This will give eligible investors a tax credit equals to 45 per cent of their investments in particular small businesses. These will include early-stage tech start-ups developing new technologies in a new way to create new proprietary products, services or process. The company must be based in Saskatchewan and have less than 50 employees.
The province expects to save $5 million through a phase-out of the Saskatchewan Rental Housing Supplement. It plans to end any new applications as of July 1. The program is designed to help low-income families and those with disabilities cover rent. A new rental support program is being co-developed with the federal government as part of the new National Housing Strategy. Clients on the program as of June 30, 2018, will be grandfathered in.
The Saskatchewan Housing Corporation is also launching a seniors’ education property tax deferral program, which will allow about 1,600 senior homeowners to defer the education portion of their property taxes through a repayable loan.
Saskatchewan will formalize its participation in the federal taxation approach agreed upon in late 2017. This will see the province receive 75 per cent of federal cannabis duty revenue.
PST will apply to all retail sales of cannabis. Due to the haze around when cannabis will be legalized, the province did not include marijuana revenues or expenses in its budget. Harpauer said there is still much uncertainty on the topic, but there may be enough data to include it in a Q2 update.
“We don’t believe that the revenues will be significantly strong in the first year, simply because of the timing of the implementation,” Harpauer said. “It is very uncharted territory.”
Municipal revenue sharing
Cities across the province will take another blow. The budget provides $412 million for municipalities, down $21.3 million or 4.9 per cent. This comes as a result of decreased funding commitments for federal infrastructure, $16.7 million in municipal revenue sharing, $16.7 million and reinstating library funding to 2016 levels at a cost of $4.8 million.
SaskEnergy and SaskPower will now pay grants-in-lieu property taxes on all their buildings, but not linear assets. SaskEnergy will now charge a wide-ranging municipal surcharge that was previously only made available to 109 communities. Municipalities will now have the opportunity to opt-in on collecting these revenues.
Those communities that never had the program will have a time frame to decide whether their residents will see the new 5 per cent surcharge. Harpauer said it will up to municipalities to sell this to their residents if they want to sign on to the program. The government said this change will mitigate the fact offset payments to cities are being cancelled and that it plans to cover any decrease.
On Twitter: @JournoMarr
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