Saskatchewan will cut education property taxes by 14 per cent and boost spending by more than $1 billion, according to a provincial budget that shows few signs of the economic storm battering the rest of Canada.
While other provinces are looking at hefty deficits amid the economic slowdown, Saskatchewan will take in $400 million more than it spends in 2009-2010, according to the budget released by Finance Minister Rod Gantefoer on Wednesday.
"Let us be strong and steady," Gantefoer said. "By remaining sound fiscal managers, we will stay the course."
However, NDP finance critic Harry Van Mulligen said the budget is built on "blind optimism," ignores signs that the economy is slowing and isn't sustainable over the long term.
"Strong and steady...we think this budget is wrong already," he said.
The centrepiece of the budget is the government's long-term solution to complaints of high education property taxes, an issue that has been particularly controversial in rural Saskatchewan.
The province says property owners will pay $103 million less in education taxes than they did last year, with an additional $53-million reduction promised in 2010.
For a Regina home with a taxable assessment of $100,000, the savings would be $457 in 2010, the government said.
In a small town like Canora, the savings would be even greater. A home with a taxable assessment of $79,800 would see a $785 tax reduction in 2010, a 51 per cent cut.
Groups representing businesses praised the cut.
"We're pretty pleased," said Steve McLellan, CEO of the Saskatchewan Chamber of Commerce. "There's still an imbalance between what a residential property pays compared to a business — in some cases, double. I think there's an opportunity to move there."
Shift in tax burden
The property tax cuts, combined with a $241-million increase in provincial grants to school boards, will result in a shift in the tax burden between the province and property taxpayers. Last year, the province paid 51 per cent and property owners paid 49 per cent.
This year, the province will be shouldering 63 per cent of pre-kindergarten-to-Grade-12 costs, while ratepayers will pay 37 per cent. It's the kind of shift school boards have been after for more than a decade.
There's another major change to school financing being introduced that may prove to be more controversial — a provincewide set of mill rates.
Once implemented, public school boards will no longer be able to set their own taxation rates. Catholic school boards will retain that right, but with a catch — if a school board's rate is higher than the provincial rate, money will be deducted from their provincial grant.
Roy Challis, the president of the Saskatchewan School Boards Assocation, said he expected some school boards will be upset about losing their autonomy. Having the ability to set school taxes is important because it lets boards respond to their local needs, he said.
Municipalities get piece of PST
Cutting education taxes was one of two major Saskatchewan Party campaign promises Gantefoer pledged would be addressed in Wednesday's budget, his second since the 2007 election.
The other big item is a new system for sharing provincial government revenues with cities, towns and rural municipalities.
Local governments have long lamented that revenue-sharing has been an ad hoc affair. But starting this year, municipalities will be getting a guaranteed slice of the provincial sales tax.
Saskatchewan's PST is five per cent, and municipalities will get one of those percentage points, phased in over two years.
It translates into a hefty increase. This year, municipalities will get $167 million in revenue sharing, under the new formula, up $32 million from last year.
Allan Earle, the president of the Saskatchewan Urban Municipalities Association, was delighted with the news, adding he had trouble sleeping Tuesday night in anticipation. Earle, who is also the mayor of the town of Dalmeny, said people in town will also be happy about the education tax cut. However, the local school board will not be happy losing its ability to set tax rates, he said.
Overall, government spending is estimated to grow by 12 per cent this year, reaching $10.2 billion, compared to the $9.1 billion estimated last year.
As usual, health accounts for the largest share of spending — 40 cents out of every dollar the province takes in.
The $4.1-billion health budget is up nine per cent from last year.
Saskatchewan is spending $200 million over two years toward construction of a children's hospital that will be built next to Saskatoon's Royal University Hospital.
Capital spending for such things as roads, bridges, and other provincial works, like schools, will hit $1 billion this year, adding to the record $1.5 billion approved last year.
While spending is way up, so are projected revenues, vaulting from an estimated $9.4 billion to $10.7 billion.
Following a year of plummeting oil prices, oil revenues are expected to be down considerably, but the loss will be more than balanced by a historically large jump in potash revenues.
For the first time ever, the province is taking in more in potash revenues, $1.9 billion, than it is in income tax, $1.8 billion.
The government says it has a balanced budget and will not need to dip into its Growth and Financial Security Fund, often called the government's rainy-day fund.
The fund will have $1.1 billion in the 2009-2010 fiscal year that begins April 1.
However, in subsequent years, the province expects to draw down on the fund, taking out about $400 million by 2012-2013.
While Canada was in the grips of a recession in 2008, the Saskatchewan economy grew 3.7 per cent.
The budget documents forecast that the provincial economy will continue to expand, with 2.1 per cent gross domestic product growth in 2009 and 2.9 per cent in 2010.
Van Mulligen challenged those numbers. He said recent private-sector forecasts from the big banks suggests growth will be well below one per cent this year. He also questioned the potash revenue projections, adding that recently Potash Corporation of Saskatchewan has cut back production and extended layoffs in the mines.