Released on November 19, 2009
Budget balanced, economy resilient despite lowest potash sales since 1972
The Government of Saskatchewan will maintain a balanced budget despite a significant decrease in revenue, mainly due to an unprecedented decline in potash sales this year.
Finance Minister Rod Gantefoer today released the Mid-Year Report, which shows the potash revenue forecast for the 2009-10 fiscal year has been reduced to $109 million, down $1.8 billion from budget. This year, the Saskatchewan potash industry has experienced the lowest sales volume levels since 1972.
This loss has been partially offset by a projected increase in oil revenue ($379.7 million), taxes ($192.8 million) and federal transfers ($169.8 million).
"Our government is working hard to deal with the significant challenge caused by a historic decline in potash revenue," Gantefoer said. "After considering several options, we've taken action to ensure our debt levels will not rise and the budget remains balanced."
To address this year's revenue shortfall, the government will:
- Defer $122 million in capital funding for new long-term care facilities still in the planning stages (Health). Government retains its commitment to provide funding in future years as construction occurs;
- Continue spending restraint measures and vacancy management initiatives;
- Transfer a further $190 million from the Growth and Financial Security Fund (GFSF) for a total transfer of $564.3 million in 2009-10; and
- Transfer an additional $275 million dividend from Crown Investments Corporation of Saskatchewan (CIC), from proceeds of the Saskferco sale.
These steps allow Saskatchewan to maintain a balance in the General Revenue Fund (GRF) with a surplus of $424.5 million. This surplus will ensure debt levels remain unchanged at $4.2 billion.
Government identified $355.9 million in expense savings at mid-year, including previously announced measures, partially offset by increases mainly to cost-share federal infrastructure stimulus funding and labour market development programming announced this fiscal year.
As a result, government spending is down $233 million from budget. Ministries that experienced decreases include:
- Health is under budget by $192.1 million from budget primarily due to deferrals of capital projects ($122 million for long-term care facilities, $95 million for the Children's Hospital, and $3 million for the ambulatory surgical care centre in Regina, offset by operating pressures including H1N1 preparedness).
- Agriculture is under budget by $40.1 million from budget, primarily due to lower-than-expected costs for the Crown Land Incentive Program, the Crop Insurance Program and the AgriInvest Program;
- Education is under budget by $31.2 million from budget, primarily due to a deferral of capital transfers not yet committed to specific projects;
- Debt servicing is down $15 million from budget;
- Tourism, Parks, Culture and Sport is under budget by $10.7 million, primarily due to a deferral of capital funding related to the Building Communities Program and savings from the Active Families Benefit; and
- Environment is under budget by $9.6 million, primarily due to savings resulting from a lower-than-average fire season.
Although real GDP is expected to decline by 2.9 per cent in 2009, private sector forecasts and the Ministry of Finance all forecast substantial growth next year.
"Despite the significant downturn in potash sales, our government will meet today's financial challenge," Gantefoer said. "Saskatchewan's economy continues to demonstrate resilience in 2009 as we've experienced the highest population surge in 50 years, employment gains that lead the nation and wage growth.
"According to leading economists, Saskatchewan is expected to come out of 2009 with one of the strongest economies in Canada next year."
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For more information, contact:
Vanessa Beaupre
Finance
Regina
Phone: 306-787-8109
Email: vanessa.beaupre@gov.sk.ca
Cell: 306-526-6793