Surging revenues turn projected Sask. deficit into $1B surplus

After forecasting a big deficit in the spring, the Saskatchewan government is now expecting to finish the fiscal year with a $1-billion budget surplus.

A $463M deficit was forecast in the spring

Saskatchewan is now projecting a $1-billion budget surplus in 2022-23. (Stefan Malloch/Shutterstock)

After forecasting a big deficit in the spring, the Saskatchewan government is now expecting to finish the fiscal year with a $1-billion budget surplus.

In March, when the spring budget came out, the province said the deficit would be about $463 million.

But in a first-quarter financial update provided Tuesday morning, the government said there has been a major turnaround due to higher resource revenues. That's a reflection of higher commodity prices for things like potash and oil.

Finance Minister Donna Harpauer said the improvement means the province can balance the budget, pay down debt and roll out an "affordability" plan.

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Finance Minister Donna Harpauer said the improvement in resource revenues due to higher commodity prices means the province can balance the budget, pay down debt and roll out an "affordability" plan.

As part of that plan, all Saskatchewan residents who are 18 years of age or older and have filed a tax return will receive a $500 cheque in the fall.

Speaking to reporters on Tuesday, Harpauer said no one on income assistance would be adversely affected by receiving a cheque and the federal government wouldn't tax the $500.

The provincial government said the plan — designed to help people with rising costs due to  inflation — will also exclude gym and fitness memberships and some other recreational activities from the PST expansion planned for Oct. 1, and continues the temporary small business tax reduction at zero per cent.

Cheques to make up most of projected increase in expenses

The province said the affordability plan is fully incorporated into the first quarter forecast, adding the $500 cheques to residents will make up $450 million of the projected $508.2 million (2.9 per cent) increase in the government's total expenses since the budget's release.

Total expense is now forecast to be $18.13 billion, it said, while revenue is forecast to be $19.17 billion — up $2.02 billion (11.7 per cent) from budget. The government said the increase is largely due to a $1.86-billion increase in non-renewable resource revenue.

Taxation revenue is forecast to be up $536.5 million from budget, with higher income and sales tax revenue reflecting stronger than anticipated economic recovery, the government said.

It also said public debt is forecast to be $1.72 billion lower than at budget. It said the return to a surplus has eliminated the need for operating borrowing and provides the opportunity to retire up to $1 billion in existing debt.

"Debt retirement and lower borrowing will save nearly $50 million a year in interest charges — savings that will stay in Saskatchewan and be re-invested in Saskatchewan," Harpauer said.

Harpauer said the province's economy is strong and growing, adding private sector forecasts are projecting that Saskatchewan will lead the provinces in economic growth in 2022.

She said Saskatchewan's unemployment rate decreased from an average of 7.3 per cent in the first seven months of last year to 5.0 per cent in the first seven months of this year, third lowest among the provinces, adding there have been nearly 24,000 new jobs created in the province in the first seven months of 2022.

So far in 2022, Saskatchewan is experiencing growth in wholesale trade, international goods exports, manufacturing sales and investment in non-residential construction that is among the highest of all provinces, she said.

"Saskatchewan's economy is now firing on all cylinders," Harpauer said.

The government said Saskatchewan will continue to have one of the lowest net-debt to GDP ratios among the provinces. At first quarter, net debt as a percentage of GDP is forecast to be 15.6 per cent, compared to 18.8 per cent at budget, it said.

Citing private-sector forecasters, the government said Saskatchewan's real GDP is now expected to grow by 4.7 per cent in 2022, highest among the provinces, and by 2.5 per cent in 2023, second-highest among the provinces.

Opposition questions scope, timing of relief

Opposition NDP finance critic Trent Wotherspoon told reporters there should have been meaningful relief for Saskatchewan people with cost of living over the long term.

"There needed to be an investment that steps up to the challenge in health care with respect to surgeries and ERs that all too often are being shuttered and … bypassed by this government," he said. "And for kids going back into classrooms that have been cut and impacted in such a dramatic way."

Wotherspoon was also critical of how the $500 payments to Saskatchewan residents will be made.

"A single parent with three children will get less than a couple with no children," he said. "The cost of raising kids is high in Saskatchewan right now so it's certainly not fair on this front."

Wotherspoon said the government should have offered this relief months ago when the Opposition was calling for it. Instead, he said, the government sat on billions of dollars in windfall revenues and waited until right before a byelection in Saskatoon-Meewasin.

"We didn't force the byelection," Harpauer told reporters. "The NDP did. And their timing was their choice."

Harpauer was also asked why the relief wasn't announced sooner.

"I just didn't feel comfortable making a relatively large financial commitment with very little data to base it on," she said.

Harpauer was also asked why the $450 million earmarked for the cheques couldn't have been invested into health-care instead.

"Each and every budget, we have increased health-care spending," she said. "But if we are using $450 million, say, just on the oil price, and then the oil price drops, where do we find that $450 million next year?"

Harpauer said the government cannot get caught up in the volatility of resource revenues and assume prices for commodities will stay this high.

"So we still will have to be very, very, very careful in our spending going forward," she said.