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Saskatchewan delivers shaky budget while searching for a strategy

April 24, 2018
Saskatchewan delivers shaky budget while searching for a strategy

When an undefeated boxer gets knocked down for the first time, one of three things happens. The champ can defensively succumb to shattered invincibility or keep swinging with disregard for a new reality – both extremes often end badly. But sometimes the champ shakily rises, neither attacking nor cowering, to finish the round and find a new strategy.

Finance Minister Donna Harpauer chose the third way in her first budget. It has neither the defeatism of last year’s budget nor bravado of budgets before that. It’s a pause, and what happens next will have a huge impact on taxpayers.

Here’s what’s happening now.

The provincial tax bill is going up by $62 for a family with an income of $75,000. That’s on top of last year’s $442 tax hike. So, over two years, the average family’s tax bill is up $504.

Last year’s budget promised income taxes would fall by a half a point this year to save taxpayers about $120 million. This budget puts that promise on hold. Instead, the budget’s biggest tax change is an expansion of PST charges on used cars that will cost taxpayers about $95 million

This budget is also shaky for the province’s long-term finances. 

The province is projecting an operational deficit of $365 million this year. Next year it’s projecting an operational surplus of $6 million. That means, if nothing goes wrong, the budget after this one will bring in 0.04 per cent more than it spends.

But there’s a problem: the budget still shows debt rising.

Governments like to distinguish between operational borrowing to pay for the salaries of nurses and teachers and capital borrowing to pay for the construction of schools and hospitals. So, while the government is projecting a tiny operational surplus next year, debt will keep rising. There are interesting academic arguments for these accounting strategies. There’s also an inescapable bottom line: whether the government is borrowing to pay salaries or pave highways, the repayment bill goes to one place – taxpayers.

This past year, the taxpayer-supported debt (all debt excluding Crown debt) hit $9 billion.

Next year the taxpayer-supported debt is projected to hit $10.8 billion.

It’s hard to grasp billion-dollar debt numbers. Most of us have trouble keeping track of our credit card balances. But, like credit card balances, it’s sobering to look at the interest payments.

Interest on the debt will cost us $437 million. That’s $53 million more than last year and $137 million more than two years ago. This is the best case scenario because if interest rates rise even a quarter of a point, it’ll cost the province an extra $14 million. And, whether the loans were for operational or capital spending, interest charges go to the same place – taxpayers.

But this budget is different from past budgets.

Nothing worked in last year’s budget. It planned to cut government employee compensation by $250 million then surrendered. Little remains of that budget except higher taxes.

Nothing worked in the budget before that. It glossed over the severity of the challenge by grandiosely guaranteeing transformative change. Transformation became tinkering.

It’s worth recognizing the magnitude of this struggle. Neither Alberta nor Ontario are making any honest effort to fix their runaway deficits. Prime Minister Justin Trudeau promised modest deficits and now there’s no end in sight to the rising debt. That context is complementary to Saskatchewan, but it’s also cautionary: slaying the deficit is necessary to avoid the fate of other governments. 

Harpauer’s budget is a pause. She has a tough year ahead. She’ll have to say no a lot to protect taxpayers from higher bills and future generations from higher debt. Now she has a year to find a new strategy to stop the borrowing and deliver tax relief.

On a personal note, delivering a budget is hard work and Harpauer did it while grieving the Humboldt Bronco tragedy in her riding – she has our sympathies and respect.

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