The provincial budget released last Wednesday provides a forecast of where the province will be spending its money and where its revenues will be coming from for the 2023-24 fiscal year, which starts April 1st. The budget also provides an update on the financial picture for the current fiscal year.
Golden West business commentator Paul Martin looked at the budget and noted there are some forecasts in the budget for what could be happening not just in the coming fiscal year, but beyond it as well.
They (the government) had a surplus of $1.1 billion this year, forecasting another billion next year, and I think that’s the part that got lost is that in over a 24-month period, they’re talking about two $2 billion surpluses as opposed to the $1 billion that’s capturing headlines,” Martin explained.
He did note that it is still, at the heart of things, a forecast. The budget delivered in 2022 had a deficit, but by the three-quarter mark of the current fiscal year, it was at a $1.1 billion surplus.
While there was a substantial surplus, Martin pointed out that a lot of the money from the budget was spent on capital expenses, without lowering taxes. This comes as Saskatchewan reached 1.2 million people, and saw the largest growth of population in one year since 1914.
“It’s in growth mode,” Martin said of the province. “We need more infrastructure, so that means things like hospitals, roads, you know you’re going to end up seeing more retail space, that sort of stuff.”
Part of devising a budget is forecasting a number of variable factors into it. For Saskatchewan, things like the price of oil, and the price of potash, are key to determining the province’s revenues based on royalties. There is also the factor of currency that needs to be considered.
“Most observers don’t take into consideration, or they don’t talk about it – they probably think about it, but they don’t talk about it,” Martin stated.
He explained the production of volumes is an important factor in foreign exchange currency. Things such as how the Canadian dollar is doing, and how the American dollar is doing, as most commodities are traded in USD.
“As interest rates go up in the US, the general trend is for the US dollar to go up with it. That means the Canadian dollar goes down, relatively speaking,” Martin explained. “Our exports become more attractive, but imports more expensive, and that you’re effectively importing inflation.”
He used food as an example of this, as when we import things like fresh produce in the winter, we are buying it from the US at the American dollar price, which means more has to be charged in Canadian dollars in order to make it affordable. This puts more pressure on the Canadian economy as a result.
The increase in municipal revenue sharing was another key part of the budget for many people. This year, there was a 13 percent increase in municipal revenue sharing, up to $297.9 million. The revenue sharing is tied to the amount of revenue brought in by the province through the provincial sales tax.
“I don’t think there’s ever enough money to go around, but in a way, you’ve got to make this reflect what the economy is capable of, and so when you tie it to things such as sales tax, and that’s what the percentage of the citizen is, you know, it’s related to sales tax in a way, it’s a reflection of what is the economy doing, what are consumers doing to spend and how much tax are they incurring when they do that kind of consumption spending,” Martin added.
Martin noted there is a municipal infrastructure deficit, and more money should be put into it, but municipalities are having to take care of many other things such as homelessness and snow removal. He related an anecdote told to him by a friend who is a member of a town council outside of Saskatchewan.
“He always sort of said the first thing that’s most important when you’re in City Council is the roads. The second most important thing is what’s under the roads, so that’s sewer, water, roads, and paved sidewalks,” Martin shared.
He also shared a piece of advice from his grandma when it comes to budgeting.
“Just be prudent all the way through and pay off your debts,” Martin concluded.