FIRST QUARTER FINANCIAL REPORT: PROVINCE STILL ON TRACK FOR SURPLUS BUDGET

Released on August 14, 2009

Government will manage downturn in potash revenues

Saskatchewan is still on track to post a surplus provincial budget this fiscal year, in spite of a $1.3 billion reduction in projected potash revenues.

This decline is significantly offset by higher-than-expected oil, taxes and other revenue, totaling $668.1 million.

In order to maintain a balanced budget, Finance Minister Rod Gantefoer today released a plan to deal with this challenge which includes:

• An additional special dividend of $185 million from the Crown Investments Corporation (CIC), from proceeds of the Saskferco sale - this is equivalent to the dividend that was budgeted but not taken in 2008-09 when the province's revenues were higher;
• Deferring $132.3 million in capital projects that are still in the planning stages, including $95 million for the Children's Hospital in Saskatoon and $30 million for education capital funding that has not yet been committed (the government maintains its $200 million commitment to the Children's Hospital with this funding to be provided in future years as construction takes place);
• Additional expenditure restraint of $49.2 million, beginning with vacancy management and reduced travel while further savings are identified.

As a result of these measures, the government will show a net decline in revenues of $558.4 million, while still posting a pre-transfer budget surplus of $50 million for the 2009-10 fiscal year.

In addition, government will transfer $399.5 million from the Growth and Financial Security Fund to maintain government debt at $4.2 billion.

Gantefoer said that while the extremely volatile commodity markets pose serious challenges to provincial revenues, Saskatchewan's economy remains strong compared to other provinces in Canada.

"The goal of the 2009 budget was to keep Saskatchewan's economy strong and steady, and Saskatchewan continues to lead the country with the best job creation record and lowest unemployment rate in Canada," Gantefoer said.

"Despite the current challenges in the potash industry, we are the only province that has more people working than a year ago. We think that's a pretty positive sign and proof that our budget is working for Saskatchewan people."

Gantefoer said that strong revenues last year allowed the province to forgo a $185 million CIC dividend. It has decided to take that dividend this year to keep needed infrastructure projects moving forward to maintain the province's economic momentum.

As a result of the government's plan, the Growth and Financial Security Fund (GFSF) balance will be $841 million.

"The fund - our fiscal insurance policy - is working exactly as it should. There is still a healthy balance as protection against further volatility in commodity markets or other unforeseen events," Gantefoer said.

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For more information, contact:

Randy Burton
Finance
Regina
Phone: 306-787-6578
Email: randy.burton@gov.sk.ca