Saskatoon

Can a budget be 'balanced' and still add to the debt? We asked economists

Are you really balancing the budget when $1.8 billion is being added to the debt?

Infrastructure spending can pay off down the road

Donna Harpauer prepares to deliver the 2019/2020 budget to reporters on March 20, 2019. The provincial budget represents the first time Sask. has had a surplus in three years. (Bryan Eneas/CBC News)

Are you really balancing the budget when $1.8 billion is being added to the debt?

The Saskatchewan's government's budget is forecasting revenue at $15 billion while expenses are projected at $14.9 billion, leaving a $34 million surplus.

But the province is projecting the debt to rise to $21 billion, which is $1.8 billion more than last year.

The provincial government says this is a balanced budget because that extra $1.8 billion is going to capital expenditures like new highways and schools. Many economists will agree.

(CBC)

Jason Childs, an associate professor of economics at the U of R, said on CBC's Blue Sky that the government has two kinds of expenses. One is the ongoing, day-to-day expenditures and the other is projects that are long term and can add value.

Childs likened it to your mortgage versus your credit cards.

"If you go into debt to buy a house and you are running a mortgage out over 25 years, that is not a big deal, right," Childs said. "That is one expense, but you are going to get value for that over time.

"If you are running up your credit card debt and not paying it off every month that's the dangerous stuff."

University of Regina associate professor of Economics Jason Childs compared infrastructure debt to a mortgage. (CBC)

Childs said if the extra debt is truly capital expenditures he is OK with the government saying the budget is balanced, but that he is always wary of governments playing fast and loose with the definition of a capital expenditure.

Haizhen Mou, an associate professor at the University of Saskatchewan's Johnson Shoyama Graduate School of Public Policy, agreed the budget is structurally balanced from a revenue and expenditure perspective.

She said the capital expenditure costs will occur over the next few years, but citizens will reap the benefits for many years.

If the economy continues to grow it makes paying back that debt easier for the government, Mou said.

Both economists agreed this budget was safe and put the Sask. Party in the position to be able to deliver a good news budget next year before the election in 2020.

"It was pretty boring as budgets go," Childs said. "The next budget will be where anything splashy happens."

Mou said the government played it safe  by maintaining the current PST rate and tight spending controls so that next year it has some cash to offer perks.

with files from CBC Sask's Blue Sky

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