Well it’s official, deficit financing on the scale not seen since the Devine era is back in Saskatchewan. The government of Saskatchewan is going to run a billion dollar deficit this year based on the fall of potash prices. As told by the Star Phoenix.
The release of the government’s mid-year financial report Thursday shows it now projecting it will take in only $109 million from potash royalties and taxes – $1.8 billion below what it forecast in its spring budget.
The government is now spending more than it is taking in, even with higher-than-expected oil royalties, tax revenues and federal transfers.
That has required a drawdown from the reserve Growth and Financial Security Fund of $564.3 million and a special dividend from Crown Investments Corp. of $460 million from the sale of the government’s share of SaskFerco.
However on a summary basis – which includes all of the operations of government including the Crowns – a deficit projected at $25 million at budget is now pegged at $1.05 billion.
The NDP were all over this today. I’ll link to Cam Broten’s website who posted the NDP press release and response to the deficit.
I liked how it started.
With the release of the Mid-Year Financial Report, NDP Finance critic Trent Wotherspoon said the Wall government has confirmed that it is responsible for the biggest example of fiscal incompetence in the history of Saskatchewan. He said the combination of grossly inflated potash revenue projections, equity stripping from Crown Corporations, and out-of-control government spending has left the province with a $1 Billion deficit on a summary financial basis and a financial blunder not seen in generations.
“Private forecasters, industry representatives, and the NDP Opposition all cautioned against the fantasyland numbers the Wall government put forward in its budget,” Wotherspoon said. “But cheerleading and popular promises ruled the day with no thought as to whether or not the expert advice it received should have been taken into account.”
Then it gets a bit weird as it moves for attacking “out of control spending” and attacks spending cuts.
Wotherspoon said the Wall government’s fiscal mismanagement isn’t just about numbers on a page; people are being asked to pay for its incompetence through cuts to healthcare, education, rural programs, and their quality in life in general. He noted that among the cuts was $122 million from the construction of long-term care facilities in rural Saskatchewan and $32 million from new school infrastructure.
So on one hand the NDP are criticizing the Sask. Party for running a huge deficit (which they should) while at the other hand trying to get upset or cutting spending to keep government spending under control.
I have friends and I respect people in both parties and here is my advice on to handle the situation.
Saskatchewan Party: You missed your revenue predictions by $1.8 billion dollars. I would fire whoever made that prediction because I agree with the NDP on this one, when you came out with this budget, you must have known it was going to be a bad year for potash prices. Even I knew it was going to be a bad year for commodity prices going into a global recession. To keep this from happening again, I would come up with an independent office of economic forecasters that would give guidance to the government that were outside the Ministry of Finance and therefore outside the influence of the political pressures that lead to really bad budget forecasting. Don’t go half-way with this. Give it legitimacy, give it some independence, and fund it properly. I am not an economist but I know many of them have ideological bents on how the world is going to pan out and that is natural. Even the best economists are also going to make mistakes. I can accept that (not $1.8 billion dollar mistakes but some mistakes). What I want to see as a voter and a taxpayer is a process in budget forcasting that is non-partisan and transparent. This would go a long way in restoring some confidence in your budget predictions which have been questioned by the media for over a year. If you want us to trust you again, you need to take some steps to ensure you don’t miss your targets again. Again, as a Saskatchewan voter and taxpayer I want to hear what your plan is to pay back your billion dollar boondoggle sooner rather than later. It’s a lot of money and you are going to take a beating in the press and in the Legislature but it’s better to deal with it up front and head on and then move on then play political games with it. Dealing with it this way will hopefully stop the comparisons to the Devine Tories of the 1980s.
Also, potash prices didn’t just fall last week. I know you a governing party doesn’t want to give negative financial updates every month but it seems prudent during a time of unstable financial times to offer a more transparent accounting of the public purse in regards how we are doing compared to our predictions.
NDP: Maybe they should not use the same press release to attack out of control spending and then attacking spending cuts. Use two pieces of paper and maybe send out two different press releases. Despite not liking the wording and structure of their release, the NDP have the high ground here, as they are the ones that slayed the deficit that last time. If I was the NDP, I would have a reunion luncheon with Roy Romanow, Janice MacKinnon, Eric Cline, and others who had to go through year after year of budget cuts to talk about how hard it was and the consequences of deficit financing in the Devine years had on the 1990s in Saskatchewan. While you are at it, give out a lot of copies of Minding the Public Purse to remind us again how hard it was to make those cutbacks as a government but also to remind us voters how hard it was to see things we care about in Saskatchewan to be cut. If I was Trent Wotherspoon, I would also use the term “billion dollar boondoggle” a lot in the days ahead but that is just me. Boondoggle is such a great word.
For both parties, I would love to see a real debate on their visions for the future. A future that involves peak oil, a liquidity crisis turning into a long term government debt crisis, a future where our federal government seems destined to burden all of us with long term debt (again), higher interest rates, cut transfer payments, and potentially higher unemployment. Are we going to grow ourselves out of this mess (doubtful) or make drastic spending cuts? Will we see a higher PST and income tax rates in our future? Will the burden be put on businesses or individuals or will someone come up with a new path to take? Tough times are ahead and it would be refreshing to hear the vision of both major parties in Saskatchewan (and for that matter, I would like to hear the Liberal Party vision as well) about the role of Saskatchewan in a smaller, less affluent world will look like.