Sask. finance minister cautiously optimistic after higher-than-expected budget surplus

Finance Minister Donna Harpauer says the province expects to bring in a higher-than-expected surplus this year.

Forecast expects $37M surplus, increases original budget estimate by $3M

Saskatchewan Finance Minister Donna Harpauer promises the 2019 provincial budget will be balanced. (The Canadian Press)

Finance Minister Donna Harpauer says she's happy with the province's mid-year report, which predicts a higher-than-expected surplus, but that she isn't resting on her laurels just yet.

Released Wednesday, the report forecasts a $37.4-million surplus, an increase of $3 million from what was expected in the budget.

"I am pleased that we are where we are," said Harpauer. "I would be more comfortable and sleep better at night if that was even stronger."

The government expects to bring in $15.4 billion in revenue this year, a 2.2 per cent increase from budget forecasts.

The province said higher federal transfers, resource revenues and income from government-owned businesses are helping with the surplus.

"Our mid-year forecast for non-renewable resource revenue is up more than $69 million compared to the budget," said Harpauer.

"This is largely due to revenue from oil and natural gas which is forecast to be nearly 46 million higher than budget."

Harpauer said agricultural spending is going to be a wild card factor moving toward the end of the year. While the province posted a record harvest, much of the crop was damaged by rain and snow.

"If cash receipts are down at the farm gate, they will spend less," she said. 

"And when they spend less, then, of course, that's less PST ... it's going to be a trickle down effect that that's hard to quantify."

Trade issues, especially with China, are also weighing heavily on this year's budget. China has banned all canola exports from Canada.

"We're a very trade dependent province," she said.

"International trade uncertainty affects almost every area -- not just for the the immediate industry itself but for the spin-off (businesses) for that industry."

Spending is also forecast to be over the projected budget, at an increase of $326 million, or 2.2 per cent. The province said pension expenses account for almost all of the increase.

Two large plans, the Teachers Superannuation Plan and the Public Service Superannuation Plan, have been closed to new members for 40 years. However, even a small change in interest rates can result in large changes on the balance sheet.

 "It is really just an accounting adjustment but one that can whipsaw the bottom line of the provincial budget by hundreds of millions of dollars from one year to the next," she said.

"One solution may be to spread the impact of these huge flood fluctuations over several years instead of having to account for them in a single year which is what other provinces do."

Saskatchewan's net debt is forecast to come in at $12 billion, a decrease of $370 million from the budget.

The province said its net debt, when looed at as a percentage of GDP, is forecast to be among the lowest in Canada.

Valid questions

Meanwhile, opposition economy critic Trent Wotherspoon gave a less-optimistic description of the province's finances.

"I think there are valid questions to be asked around whether or not the response to the horrible harvest and the market conditions that producers are facing are being responded to properly by this government," he said.

Wotherspoon noted the update predicted an increase in real GDP of 0.6 per cent this year — half of the initially predicted 1.2 per cent growth rate.

"Retail sales are down, manufacturing is down, all measures of construction and residential activity are down in a really big way," he said.

"It's certainly clear that our economy is hurting."

While Wotherspoon said he understood the need for fiscal caution, he also said the province needs to better address serious issues like addictions and mental health.

"We have a serious deficit in our classrooms and in our emergency rooms, in our mental health and addiction services and those come at a real cost certainly in people's lives," he said.

"Certainly, for us as a province, we know that a dollar into mental health and addiction services saves us many, many dollars and will save lives."