The Conference Board of Canada’s Economist Daniel Fields offers the following insights on Saskatchewan’s 2018 Budget:
“Saskatchewan’s 2018 Budget introduced some minor tax increases and provided a few more details on the stringent spending plan required to achieve the government’s goal of balancing its books by 2019–20.”
—Daniel Fields, Economist, The Conference Board of Canada.
- The 2018 Saskatchewan budget, released on April 10, focused on how the government will achieve its balance target by 2019–20.
- On the revenues side, the budget removed tax exemptions on light used vehicle sales as well as on Energy Star appliance purchases. These changes will generate roughly $115 million in revenue, which pales in comparison to last year’s large tax hikes that added nearly $900 million in new revenues.
- The 2018 Saskatchewan budget is based on a real GDP forecast of 1.3 per cent in 2018 and 2.5 per cent in 2019. This is slightly stronger than the Conference Board’s current economic outlook, resulting in some downside risk to their revenue projection.
- The government projects total revenues to grow by 2.9 per cent between 2018–19 and 2019–20 backed by a stronger economy, combined with higher tax receipts and stronger royalty revenues.
- The deficit problem will not be completely solved through higher taxation, however, as spending growth needs to be tightly restrained. Budget 2018 targets essentially no growth in total program spending over this year and next.
- Unfortunately, details on how the province will achieve this ambitious spending target were only provided for 2018–19. The government is targeting a minuscule 0.6 per cent growth in health care, in addition to holding social assistance spending flat. Additionally, education spending will fall considerably., However, it is difficult to parse out the actual spending change in this department due to pension adjustments.
- Similar restraint in these high cost areas will be required for 2019–20 if total program spending targets are to be met next fiscal year. However, details on how that will be achieved were not outlined in this year’s budget.
- Budget 2018 forecasts a deficit of $365 million in 2018-19, down from $595 last year. The government anticipates 2018–19 to be the last year in the red, as a small surplus of $6 million is expected in 2019–20.
- Curiously, the government did not set aside any contingency in the case of a shortfall in revenues or overruns in spending.
- Net debt is slated to rise to $12.7 billion this year, which is more than double its 2014–15 level. Over the same period, debt charges as a share of revenues have risen from 3.7 per cent to 4.6 per cent. Despite the province’s increase in debt charges, as a share of revenues, it will remain the second lowest in the country.
- Overall, after a recession pushed the province into the red, Saskatchewan is focused on returning to a balanced budget. After a considerable increase in taxes last year, the province is now looking to restrain spending to reach its goal. Achieving the degree of spending restraint outlined in its budget will certainly be a challenging endeavor.