A long-standing tradition in the Saskatchewan legislature by the governing party to table a detailed budget with information about spending estimates and revenue forecasts did not take place last week due to uncertainties as a result of the COVID-19 pandemic.
The provincial government only announced the 2020-21 spending estimates on March 18 to give Saskatchewan residents an indication of the allocation of money in the budget over the next year, but revenue forecasts will only happen later.
“Yesterday was quite a different provincial budget for us, nothing that we've ever seen before,” Swift Current MLA Everett Hindley told the Prairie Post. “As a matter of fact, I don't even know if we're technically calling it a budget, but more so just the spending estimates for the upcoming fiscal year without revenue forecasts and that's because of the ongoing COVID-19 pandemic.”
He noted the government has been preparing the budget for the new fiscal year over a period of months, which is typically how long the process takes, but it faced unusual circumstances as budget day came closer.
“Obviously things have changed quite substantially just in the last number of weeks here with respect to not just our provincial economy but the global economy,” he said. “So the spending estimates were tabled without revenue forecast, and we'll figure the revenue stuff out at some point down the road. The finance minister said it's just impossible to project what we're going to be getting as a provincial government for revenues in the months ahead. There's going to be such a large impact on it, it's just unfathomable at this point.”
The Saskatchewan NDP, the official opposition in the provincial legislature, asked the Saskatchewan Party government to delay the announcement of the budget and to update fiscal assumptions in view of the global economic impact of COVID-19. Hindley said the government disagreed with that position of the opposition.
“We felt it was important as a government to provide some stability, to show the people of Saskatchewan that we have been working on a budget, regardless of what's happened in recent weeks here with COVID-19,” he explained. “We were working on a budget here with some significant expenditures in a number of areas here that we felt were important that couldn't afford to wait.”
At the same time the provincial government will look at where additional support might be required to address the impact of COVID-19 on Saskatchewan. It will look closely at initiatives by the federal government to support individuals and businesses affected by the pandemic and the provincial government will consider what other measures are needed in Saskatchewan.
“The finance minister said to other media we're probably going to run a deficit, that's just the way it's going to be, and I can't think of one government that wouldn't be,” he mentioned. “We're fortunate that we're in a pretty strong fiscal position right now, because of some steps we've taken in recent years to get our own budget back to balance. We've got $1.3 billion in cash right now, our debt to GDP ratio is still very low. So in terms of the overall financial health of this province we're in a pretty good position to fight through this as best as we can, frankly better than a lot of other provinces in Canada right now.”
Although there are many uncertainties over revenue forecasts for 2020-21, he felt positive about the details in the spending estimates and about the government’s spending goals over the next year.
“There's is a significant increase in expenditures in a number of ministries and agencies,” he said. “The estimates represent a little over $14 billion of government expense through ministries and agencies.”
The total expenditure of $14.15 billion in 2020-21 will be an increase of 3.1 per cent compared to last year’s budget expenditure.
The Ministry of Health received an allocation of $5.77 billion, which is an increase of 3.8 per cent or more than $211 million over last year. This includes an amount of $3.74 billion to the Saskatchewan Health Authority (SHA), which is an increase of $140.6 million or 3.9 per cent over last year.
“The SHA is what funds the doctors, the nurses, the other health care professionals,” he said. “So many of those who are currently on the frontlines of battling the COVID-19 pandemic.”
Hindley felt another important investment in the health budget was the allocation of $434.5 million for mental health and addictions supports and services, which was an increase of $12 million compared to last year. A new specialized crystal meth inpatient treatment service in Estevan will provide treatment beds and services for the entire province.
The Ministry of Education’s budget will increase by 3.5 per cent ($86 million) to $2.57 billion. The 27 school divisions will receive $1.94 billion in operating funding for the 2020-21 school year, which is an increase of $42 million over last year.
The Ministry of Social Services budget of $1.29 billion is an increase of 4.1 per cent ($50.6 million) over last year. Funding to third-party service providers will increase by $10.9 million and there is also an increase of $6.8 million to fund those working with people with intellectual disabilities. The funding to service providers that support at-risk children, youth and families will increase by $2.5 million.
Hindley mentioned that community-based organizations and service providers in the Swift Current area will benefit from the increased allocations in the budget of the Ministry of Social Services.
Municipal revenue sharing through the Ministry of Government Relations will be $278 million in 2020-21, which is an increase of almost $27 million or 11 per cent over last year.
The budget estimates include nearly $648 million to the Ministry of Highways and Infrastructure to improve safety and increase the capacity of highways. More than 1,000 kilometres of provincial highways will be improved, and he felt the Swift Current region will also benefit from these road improvements.
“That's part of our growth plan targets to do 10,000 kilometres of highway by 2030,” he said. “I think once we start to see some of the tenders come out, we'll see some highways projects likely here in southwest Saskatchewan.”
Hindley highlighted the announcement in the spending estimates of a PST rebate for new home construction. It will be up to 42 per cent of the PST paid on a new house contract up to $350,000 (excluding land). It will be available for new homes purchased after March 31, 2020 and before April 1, 2023. This rebate was developed by the finance minister through consultation with several major homebuilding associations in Saskatchewan.
“We've been hearing a lot from the construction industry about some challenges that they are facing for a variety of reasons,” he noted. “Some have said the application of the PST on new home construction has not been helpful, but there's been other things with respect to the overall general economy, the number of used homes that are on the market right now, the mortgage stress test from the feds, and that all put some pressures on the home building sector.”
He added that the provincial government wanted to assist homebuilders in the province, but the PST on the construction industry will remain in place. The decision to charge PST on construction contracts was made a few years ago as part of a broader effort by the provincial government to diversify revenue sources.
“We made some changes in budgeting and where our revenues came from and there were a number of decisions made, including increasing the PST and expanding it to other items such as home construction,” he said. “The reason that was done was to get us off a reliance on oil revenues and revenues of non-renewable resource royalties.”
In retrospect, he felt that was a good decision by the provincial government, because revenue forecasts are easier if the exposure to fluctuating commodities is reduced.
“For example, oil revenues only represent 4.5 per cent of total revenues to the government,” he said. “Can you imagine today what revenues are right now when oil is around $20 a barrel and even less for Canadian oil? That's why we made these very difficult changes, but now we're more reliant on more stable forms of revenue – income tax, corporate tax, PST, that sort of thing. … That helped us get back to balance and allowed us to be where we are today, which is in a cash position of $1.3 billion to help us weather something like COVID-19.”