Tag Archives: potash

Tough Year Ahead for Wall?

Trouble ahead for Brad Wall and the Saskatchewan Party?

In early December, the government issue a list of economic highlights for 2013: population growth, up 100,000 in six years; economic growth of 3.6 per cent, second-highest in Canada; unemployment rate of 3.6 per cent, lowest in Canada; employment up 17,000, “an all-time record;” and record crop production of 34.2 million tonnes (later increased to 38.4 million tonnes).

But recent economic forecasts have been more subdued. suggesting that the province’s economy may be due for a slowdown next year. Earlier this month, RBC downgraded Saskatchewan’s forecasted economic growth from 2.7 per cent to 2.1 per cent in 2014, which put us squarely in the middle of the pack among the provinces.

Part of that downgrade is just a return to a normal crop from the record harvest in 2013. But part of it is plummeting potash prices, plunging production and reduced capital spending.

Similarly, two commodity price reports this week pointed to weakness, not just in potash, but uranium, oil and agricultural commodities, like wheat and canola.

Oil prices are falling, thanks to widening differentials between western Canadian heavy oil and benchmark West Texas Intermediate, which are now pushing $40 US a barrel. Even Canadian light crude prices are $20 US a barrel lower than comparable U.S. crudes due to growing supplies of light oil production from North Dakota’s Bakken play and a chronic shortage of pipeline capacity.

Potash prices have fallen below $300 US per tonne, thanks to the collapse of the BPC cartel, while uranium prices are at a “low ebb” at $34.50 US per pound due to the fallout from the Fukushima tsunami in 2012 and the subsequent idling of 50 Japanese nuclear reactors.

Even agricultural commodity prices have been under pressure lately due to the “monster-sized crops” in the U.S. and Canada and are sitting nearly 12 per cent below levels one year ago.

Analysts forecast commodity prices “bottoming’’ in 2014 before returning to the “bull’’ market in 2015 and beyond.

The point is, Wall is right to be cautious about the province’s economic fortunes in 2014, despite the record performances posted in 2013. But that’s not Wall’s only problem.

He knows that the province’s fiscal position is far more tenuous than the rosy picture painted by Finance Minister Ken Krawetz in his midterm financial statement, which shows the province sitting on a $22.8-million surplus in the general revenue fund. This is the same general revenue fund that the provincial auditor’s report said was nearly $600 million in the hole at the end of the 2012-13 fiscal year, instead of the $58 million surplus reported by the finance ministry.

The same provincial auditor issued an “adverse’’ opinion on the province’s books, saying the financial statements do not provide a fair and accurate accounting of the province’s fiscal position.

So Wall finds himself between a rock and hard place, largely of his own making. Happy New Year will have a whole new meaning for the premier in 2014.

Don’t count the Premier down quite yet.  He enjoys considerable trust from the people of Saskatchewan and as Alan Blakeney once said, “It’s easier to govern duing adversity than prosperity.”  That being said, winning a third election is much tougher than winning the second.

My vote | 2011

After posting what I believed to be a fair and balanced explanation of who I was voting for last year, I learned that there was no way you could announce and explain how you vote without alienating those on the other side.  Voting always has been and probably always will be (for those of us who actually vote) a personal thing that upsets those that see the world differently.   So a wise person would keep it quiet but I am going to keep up the practice of explaining who I am voting for and why.  As always, the comments are open for a rebuttal or even a good rebuke.

As most of you know, I grew up Progressive Conservative.  My first campaign I helped out on way Hon. Ray Meiklejohn’s 1986 campaign for what was then called Saskatoon Mayfair (old massive riding that was Saskatoon Northwest, Meewasin, and part of Saskatoon Massey Place).  I was twelve.  I later ran in Saskatoon Riversdale in 1995 where I narrowly (by 3000 or so votes) lost to Roy Romanow.  If he wasn’t Premier, beloved in the riding, accomplished, a better politician, well financed and far more popular than I was, I would have taken him.

In 2003 I was planning to throw my vote away and vote Saskatchewan Party (they have never run hard in the riding) when Hon. Eric Cline came to my door late one evening while campaigning.  I was his last house to door knock on and he was ahead of schedule so when I asked him some questions, he got all animated and passionate at the door and we had a good discussion about provincial policy, politics, and even some NDP politics.  It was a good enough discussion that I decided to vote NDP for the first time in my life (although I did have second thoughts while heading into the voting booth)

In 2006 or 2007, I think Linsay Martens emailed or Facebooked about Cam Broten’s campaign and asked me to check out his website and consider supporting him.  I checked out the website and I knew Cam would win but I was busy helping out with Ken Cheveldayoff’s campaign.  I don’t think I met Cam that campaign but while helping to elect a Saskatchewan Party candidate, we did vote for Cam in Saskatoon Massey Place as I thought Cam would be a good MLA and I have always been a firm believer in the need for a strong opposition.

Cam won by around 60% of the vote and I ran into him at the Community Christmas dinner for the Salvation Army and we had a good chat.  I think Cam was the first Saskatchewan politician to embrace Twitter (@cambroten) and we connected online.  Over the last couple of years I have found him easy to work with, tremendously helpful when I needed some help or a question answered and often would refer me to another MLA when I was ranting about something or had a question on Twitter.  To be honest he kind of raised my expectations for how approachable a MLA could and should be.

In the Legislature, he went toe to toe with Hon. Rob Norris and held the government accountable for a debacle over the Carlton Trail college mergers.  He didn’t score any cheap political points during those debates and I felt brought some restraint to a debate that could have gone ridiculously partisan.  While Cam is obviously partisan as a NDP MLA, we can talk about issues we disagree on.  This is a quality that not all elected officials have.

Voting NDP is not first nature for me.  I tried to like rent control and look how that turned out.  I can’t agree with a potash royalty rate review because I hate the idea of a government reneging on it’s word (a NDP government at that) with a royalty rate that was just signed.  I really like the Bright Future’s Fund but that idea was lifted from the Saskatchewan Liberals.  On top of that, I really like the Saskatchewan Party’s SAID program and I think overall, the Wall government deserves another four years.

Re-Elect Cam BrotenDespite the fact that the NDP seem to be struggling in the polls, I am going to vote for Cam Broten.  I still believe MLAs matter and Cam does an excellent job.  An effective government needs and effective opposition and Cam has shown that he can help hold them accountable in the Legislature, the media, and online.  As a resident of the riding, the issues I have, he experiences as well.  In addition to living in the riding, he is a tireless campaigner; talking to neighbours and constituents online, on the doorstep, and through his involvement in community events.  There were many days over the last four years in the freezing cold or blazing heat that his Twitter feed said, “knocking doors in ___________”. 

His first four years were excellent and he deserves another four.  The voters in Planet S magazine agree with me (they named him the best MLA two years in a row).  I have high expectations for my elected officials.  Not many have met them over the years but Cam has exceeded them.

Deficits are Devine

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.