The Saskatchewan government will spend 8.4 per cent more in 2007-2008 with a budget that includes a new subsidy for seniors who buy prescription drugs, another tuition freeze for post-secondary students and a tax holiday for recent grads who make a living within the province.

Finance Minister Andrew Thomson unveiled the 2007-2008 Saskatchewan budget on Thursday.
(CBC)

What is expected to be the last budget before a provincial election projects $650 million in extra spending. To stay out of the red, the province will have to draw on its reserves to the tune of half a billion dollars.

That's because revenues are expected to be $7.87 billion while expenses are set at $8.35 billion.

Drawing down the rainy day fund

Finance Minister Andrew Thomson released the budget in the Saskatchewan legislature Thursday morning.

'This budget continues to build a bright future for young people, for seniors, for families.'—Finance Minister Andrew Thomson

"This budget continues to build a bright future for young people, for seniors, for families," Thomson said.

However, Opposition finance critic Ken Cheveldayoff accused the government of trying to buy votes with a "desperate, reckless spending spree" using the taxpayers' credit card.

"It's worse than we could have imagined," the Saskatchewan Party MLA from Saskatoon said.

Thanks to the $510-million transfer from the fiscal stabilization fund — the province's so-called rainy-day account — there's a budget surplus of $75 million, the government said. However, the Opposition insists it's really a deficit budget.

'It's worse than we could have imagined.'—Opposition finance critic Ken Cheveldayoff

As always, health care is the largest single item in the budget — $3.45 billion, or 44 per cent of operating spending — followed by education and training, at $1.61 billion or 21 per cent.

$15 limit on prescriptions

Health spending is going up by about $267 million. Part of the increase is going toward a new subsidy for prescription drugs for seniors. Starting July 1, people 65 and older will pay no more than $15 per prescription.

The government estimates the plan will cost about $53 million a year when fully implemented and will save 115,000 seniors an average of $400 a year.

The budget is 'reckless,' Opposition finance critic Ken Cheveldayoff said.

The NDP government rolled out a series of big tax cuts last year, including a business tax reduction and a cut to the PST to five per cent from seven per cent.

In comparison, this year's budget is relatively light on new tax measures, although seniors will benefit from a major provincial tax change — income splitting. The new policy mirrors an income-splitting provision introduced in Monday's federal budget.

Grads get $10,000 tax break

The province is also giving a new $10,000-a-year income tax deduction to young people who work in Saskatchewan after graduating from a post-secondary institution.

When combined with existing deductions, the change means post-secondary graduates won't have to pay provincial income tax on the first $20,000 they earn in a year. The exemption lasts five years after graduation.

For those still in school, a post-secondary tuition freeze that's been in place since 2004 will continue for at least another year. Payments to universities and colleges to make that possible will cost the treasury about $22 million.

On the revenue side, the good news is that tax revenue and non-renewable resource revenue are expected to be up slightly compared to what was budgeted a year ago.

Sales tax revenue declining

As usual, the biggest single revenue source for the province is personal income tax. In the fiscal year that begins April 1, it's expected to put $1.68 billion in the province's coffers.

But the government isn't expecting a repeat of the record-setting revenues that it raked in — as opposed to budgeted for — over the past year. A big drop in sales-tax revenue is projected, thanks to last year's cut.

Until Monday's federal budget, the province was projecting that transfers from the federal government would be down from 2006-2007.

Cash earmarked for debt reduction

The province found out Monday that it will be getting $226 million in equalization payments, numbers not reflected in the provincial budget documents. However, the province said Thursday that $158 million of the $226 million would go toward debt reduction.

The other $68 million is to go toward property tax relief, the government said.

However, the federal budget must pass before Saskatchewan will get that money.

Also in the provincial budget:

• $127.3 million in revenue-sharing for municipalities, a 30 per cent increase from what was budgeted last year.
• $107 million in education property tax relief, representing an eight per cent cut. If the federal equalization money comes through, that will go up to 10 per cent.
• $534 million for infrastructure, including highways, roads and bridges, with plans for more twinning of the Trans-Canada Highway and highways 16 west and 11 north of Saskatoon.
• $4.4 million for increased police and prosecutions and to expand programs for sexually exploited children.
• $78.5 million for the Cancer Agency, including a 17 per cent increase in money for cancer drugs and medical supplies.
• With the $510 million being withdrawn, the fiscal stabilization fund will have $378 million by the end of the fiscal year.
• People on social assistance will receive an extra $10 a month.
• $3 million for programs for children with autism.
• About $560 million to service the province's debts. Total government debt (not including Crown corporations) is expected to reach $7.32 billion, an increase of about $30 million. 

(CBC)