Government projects $365M deficit

Scott Moe gives his victory speech after being voted as the new leader of the Saskatchewan Party and, by extension, Saskatchewan's premier, at the Sask. Party Leadership Convention in Saskatoon on Jan. 27, 2017. -- Peter Lozinski/Daily Herald

PST exemptions lifted, 3.5 per cent salary reductions abandoned in Scott Moe’s first budget as premier

Premier Scott Moe and local MLA Joe Hargrave may have promised another tough budget, but the provincial government, for the most part, backed off from it’s most controversial moves that sparked protests last year.

There were few major cuts, and some controversial changes from Brad Wall’s last budget were reversed.

That includes the promise to cut 3.5 per cent across the board in compensation. Finance Minister Donna Harpauer admitted in a response to a reporter that the government had conceded defeat on that measure.

“ At (the second quarter), we recognized we weren’t going to realize the 3.5 per cent reductions,” she said.

“It will be up to the managers within each of our areas to manage their compensation package.”

Instead of the $250 million reduction promised last year, the government is instead looking to reduce spending by $70 million, split into $35 million in both this year and next. The savings will be split into $20 million from Crown corporations, and $15 million from the executive branch. Those savings will be found through efficiency and attrition, Harpauer said, and by managing vacancies and sick time.

“There are no layoffs related to this budget,” she said.

“I can never say there will be no layoffs if there’s a change (in a department), but related to this budget and budget decisions, there are no layoffs.”

Those “efficiencies,” she explained, include reviewing things like IT systems. Other savings will be found by replacing retiring, long-serving, highly-paid public servants with new hires at a lower pay grade.

Overall, the government’s plan for the 2018-19 fiscal year will be to run a deficit of $365 million. The Ministry of Finance predicts a return to balance in the 2019-2020 fiscal year, with a modest surplus of $6 million, with higher surpluses of $108 million and $212 million over the next two years.

The projected $365 million deficit is based on a revenue forecast up $80 million in this upcoming fiscal year, based on higher resource revenue, income from Crown corporations and increased tax revenue.

The tax revenue increase comes without any individual increases; though the government has backed off a planned reduction from last year’s budget.

The promised 0.5 per cent decrease in income taxes has been postponed, as has the indexing of income taxes. Harpauer did not indicate when indexation or the promised tax cut would move forward.

The province also ended the PST exemption on the purchase of used light vehicles. PST will continue to be exempt on purchases of used light vehicles between immediate family members, and for private sales of $4,999 or less. The trade-in allowance, however, has been reinstated.

The province is also ending the PST exemption for energy star-certified appliances. The decision was made because energy star appliances dominate the market, and the savings in energy usage were deemed enough of an incentive to buy the appliances.

Those changes to the PST regime, along with projected growth, are expected to increase revenue from taxes.

The budget also assumes an oil price of $58.18 per barrel WTI, an increase of almost $9 per barrel from 2017-18. Drilling activity is expected to increase slightly. The prediction was made by averaging private sector estimates. The government is also anticipating a slight potash price increase of 3.7 per cent, and an increase in sales of $500,000.

Private sector forecasters expect provincial GDP to grow by 2 per cent in 2018 and 1.9 per cent in 2019.

Harpauer said the government has successfully lowered its reliance on non-renewable resource revenue to 10 per cent of its overall income, down from a nigh of 33 per cent. She credited last year’s “difficult” budget with helping reduce the reliance on resource revenue for income.

 

 

 

Thierman Financial