By Katie Ryan
Saskatchewan will dip into its rainy day fund to cope with the groundbreaking drop in potash sales and balance its books.
Projected potash revenue will now only total $109 million, instead of $1.9 billion as originally estimated in the spring budget, thanks to the lowest sales volume levels since 1972. Finance Minister Rod Gantefoer confirmed last week, when he released the Mid-Year Financial Report, that the province’s economy is shrinking. The province’s gross domestic product is expected to decline by 2.9 per cent this year as well, contrary to the 2.1 per cent economic growth projected in the budget.
“There is no denying that Saskatchewan has been affected by the global economic crisis, this province has demonstrated great resilience in the face of the global downturn. As economies around the world improve, so will the demand for Saskatchewan’s goods and services and we expect to be one of the top economic performers in 2010,” said Gantefoer optimistically during a phone conference.
The province will maintain a balanced budget and even post a general revenue fund surplus of $424 million according to Gantefoer, but will take $190 million from the Growth and Financial Security Fund, for a total transfer of $564 million in 2009-10 to do so. To stay out of the red, the government will also take about $560 million from the sale of Sasferco fertilizer plant.
Additional capital funding will be pushed back, restraints will continue on spending and filling vacant government positions as well, to correct this year’s revenue shortfall. Funding slated for new long-term care facilities – $122 million – will also be deferred.
“Funding previously provided for these projects is not needed right away. As with the other capital deferrals announced earlier in the fiscal year the same rules apply here, funding will be provided in future years as construction occurs,” said Gantefoer, adding $195 million will continue to be held for use in the future to build Saskatoon’s children’s hospital.
The $424 surplus will ensure debt levels remain unchanged at $4.2 billion, though financial officials say the province is forecast to have a $1.05 billion deficit on its summary statement.
Not everyone is optimistic about the steps government is taking to address this year’s revenue shortfall and how the province’s economy will fare.
The opposition NDP said that the report confirms that the Sask. Party is responsible for the biggest example of fiscal incompetence in the province’s history.
“The NDP, private forecasters and industry representatives all cautioned against the fantasy land numbers the Sask. Party put forward in its budget,” said Trent Wotherspoon, NDP finance critic, in a prepared statement. “But cheerleading and popular promises ruled the day with no thought on the expert advice.”
Gantefoer acknowledged that while spending is down by $233 million from budget, the government had increased spending since coming to power to fulfill commitments made in the election process.
“I haven’t heard any suggestion from the opposition in terms of what things we spent on that they would have eliminated or not initiated. We turned particular attention to look after the most vulnerable in the economy because it was a very buoyant economy at the time,” said Gantefoer.
“They always say that a rising tide floats all boats, but many boats are beat up by life and have some holes in them. So, we took the extra attention to make sure that we were being particularly sensitive to the needs of lower income people.”
When it comes to next year’s budget, Gantefoer said the government will plan and proceed with caution.
“I think if you are going to have any opportunity to make significant reductions in program expenditures you have to do that as part of the budget process. I acknowledge that there is no doubt we have to reduce the rate of growth of our expenditures in this province,” he said.
“We’re going to have to be very vigilant and prudent in terms of assessing all of those programs as part of our 2010-11 budget process.”