Saskatchewan Budget 2020: Government forecasts record-high $2.4B deficit
Finance Minister says budget went from surplus to deficit due to pandemic, oil price drop
The Saskatchewan government is forecasting a record-high $2.4 billion deficit — what Finance Minister Donna Harpauer is calling a "pandemic deficit" — for 2020-21.
Adjusted for inflation, the forecast is in line with the late 1980s deficits of the Saskatchewan Progressive Conservative government. A more recent comparison is 2016-17, when the province posted a $1.2 billion deficit.
The province released its full budget Monday afternoon, nearly three full months after it was originally expected.
On March 18, Harpauer announced the government's spending plan but held off on revenue projections because of the March oil price collapse and the COVID-19 pandemic. At that time, the province projected $14.15 billion in expenses, with an additional $1.3 billion in expenses from across other government entities, for a total of $15.5 billion.
Harpauer said Monday that the province had projected a surplus for 2019-20 and 2020-21, but this budget year was thrown into turmoil by the worldwide economic situation.
"Every province, every jurisdiction in the world, has seen its economy and finances hit hard by the pandemic. Saskatchewan is not immune or alone," Harpauer said Monday.
Non-renewable resource revenue is forecasted to drop by 43 per cent or $753 million, to the lowest point in two decades.
"This budget includes over $1 billion in support related to our fight against the pandemic, for individuals, for businesses and for initiatives to help our economy recover."
Revenue is projected to be $13.6 billion, down 8.3 per cent from last year. Expenses are projected to be $16.1 billion, up 7.2 per cent from last year's budget.
Saskatchewan NDP Leader Ryan Meili said the budget does not have adequate transparency, noting a lack of long-term projections beyond March 31, 2021.
"We have no idea what the plan is for after this year, when they plan to come back to balance or how they plan to do that," Meili said.
Meili said the government has a past history of making large spending cuts that damage Saskatchewan's economy over time.
Harpauer said economic recovery from the pandemic will be partially dependent on other countries and jurisdictions reopening their economies.
"This is going to be a multi-year fix to get back to where we were," she said. "So, I think I can safely say we won't be balanced a year from now either."
She did not rule out future tax increases, but said taxes would not be raised this year.
Harpauer said she did not foresee job cuts and that the government would honour the collective agreements it has, but said future contracts could be facing "zeros."
The three-week sitting of the legislative assembly kicked off Monday with the budget details and will be highlighted by 60 hours of budget scrutiny in committees.
Harpauer said Saskatchewan has tackled the health and economic costs of the pandemic well in comparison to other provinces. The examples she cited were:
- Saskatchewan's per capita COVID-19 case counts are nearly 80 per cent below the national average.
- Saskatchewan has the second-lowest unemployment rate in Canada.
- The number of workers declined by 12.4 per cent from February to April, the lowest decline among provinces.
- In April, agriculture product exports were up more than 20 per cent.
"The 2020-21 deficit is not a structural deficit. It is a pandemic deficit," Harapuer said.
Harpauer said the government will develop a plan to get back to balance "in the coming months."
"Saskatchewan is well-positioned to recover from the effects of the pandemic because of the strength of our people and because we produce what the world needs – food, fuel and fertilizer," Harpauer said.
Most of the government's spending plans were revealed in March. Highlights include increases in health, education and social services.
Health care spending pre-COVID-19 was a record-high $6.18 billion, up $200 million from the previous year.
There is $435 million dedicated to mental health and addictions — 7.5 per cent of the overall health budget.
The K-12 and post-secondary education budget is $3.36 billion, an increase of $79.4 million or 2.4 per cent from the previous year.
Social services spending is up by $58 million - a total of $1.49 billion. It includes an increase of $14 million to the operations of community-service organizations.
On Monday, the government said its COVID-19 spending can be broken down to $700 million to address the challenges of the pandemic and $200 million to establish a health and safety contingency.
Included in that is $150 million for shovel-ready municipal infrastructure projects, $150 million for the reclamation of oil and gas wells and facilities, $56 million for the Temporary Wage Supplement and $50 million for the Saskatchewan Small Business Emergency Payment.
The $200 million health and public safety contingency is money set aside to deal with pandemic-related challenges, including a potential second wave of COVID-19 later this year.
The government previously announced $3.1 billion in capital infrastructure spending this year, which is expected to grow to $7.5 billion in total next year.
It will also spend $4.2 million to establish three provincial trade and investment offices in Japan, India and Singapore.
The government cited uncertainty around prices and the effect of COVID-19 on the provincial economy when it decided not to present a revenue projection in March.
When compared to the 2019-20 budget, the government's forecast for major economic indicators looks very different.
The province based the number's in Monday's budget on the following predictions:
Real GDP — decrease of 6.3 per cent.
WTI Oil price — $30 US/barrel.
Potash — $188 US/tonne.
Canadian dollar — $0.71 U.S.
Retail Sales — decrease of 18.8 per cent.
Provincial debt continues to rise, with operating debt at $7.3 billion and overall public debt at $24.3 billion, up from $21.6 billion at budget 2019-20.
The Ministry of Finance said additional COVID-19 related borrowing of $1.9 billion is expected in 2020-21 to "maintain services and infrastructure investments."