The Conference Board of Canada Economist Daniel Lam offers insights on Saskatchewan’s 2019 Budget:
“Following two years of recession in 2015 and 2016, that drove the province deep into the red, Saskatchewan drastically increased taxes and announced a stringent spending plan with the goal of returning the province to balance by 2019–20. In Budget 2019, it appears that these past measures have allowed the province to make good on that promise, with a projected surplus of $34.4 million next fiscal year.”
—Daniel Lam, Economist, The Conference Board of Canada
A two-year recession brought on by crashing oil prices pushed the province into a deficit that exceeded $1 billion in 2015–16 and 2016–17. But quick government action in Budget 2017, including nearly $900 million in new taxes as well as stringent spending plan, have turned the province’s fiscal fortunes around.
The 2019-20 Budget, released on March 20, forecasts a minor surplus of $34.4 million for 2019-20. The province now projects small surpluses throughout the forecast period ending 2022–23.
These surpluses will mostly be maintained through continued cost containment, as they plan to hold total expenditures (which include debt repayment charges) to growth of 2.0 per cent per year—well below the pace of inflation and population growth.
This spending plan will be very challenging to maintain over an extended period given strong demands for health care services from an aging population (health care currently makes up nearly 40 per cent of the budget), providing a downside risk to the fiscal forecast.
No changes were made to personal marginal tax rates or corporate income tax rates, however, the tax rate on potash production will be raised through the elimination of the Saskatchewan Resource Credit and deductibles related to potash projects.
There was also no mention of implementing a carbon pricing scheme that meets the standards of the federal government. Therefore, Saskatchewan is set to face the federal fuel charge on April 1. The charge will start at $20 per tonne (or 4.42 cents per litre of gasoline at the pump and 3.91 cents per cubic metre of natural gas for home heating) and rise to $50 per tonne by 2022. This is in addition to the implementation of Ottawa’s Output-Based Pricing System (OBPS) on January 1.
Strong revenue growth in 2019–20 will put the province over the final balance hurdle. Higher revenue estimates can be attributed to solid gains in corporation taxation revenues and increases from royalty revenues (mostly from the higher taxes paid on potash production).
Overall, revenues are expected to grow at a relatively modest pace of 2.1 per cent over the budget forecast period.
The 2019-20 Budget is based on a real GDP forecast of 1.2 per cent growth in 2019 and 2.4 per cent growth in 2020. The Conference Board forecasts economic growth at 2.2 per cent in 2019 and 1.0 per cent in 2020. More info can be found in our Provincial Economic Outlook.
Overall, Saskatchewan’s finances are in much better shape than many other provinces, especially following a two-year recession. Saskatchewan’s net debt is equal to 14.8 per cent of GDP, third best in the country.