Falling Tax Revenue Increases Deficit

Released on November 22, 2016

Restraint Measures Include Public Sector Hiring Freeze To Control Labour Costs

A $400 million drop in provincial tax revenue has pushed the forecast deficit to $806 million, according to the 2016-17 Mid-Year Financial Report released today by Finance Minister Kevin Doherty.

“Continued low oil and potash prices are having a greater impact on revenue than expected,” Doherty said.  “It has now been two full years since the oil price started to drop in the fall of 2014, and we are seeing a much greater effect on corporate and personal income tax and the Provincial Sales Tax.

“To start moving the provincial budget back to balance, significant restraint measures are needed.  Measures will be implemented now, with more to follow in next year’s budget.”

In total, $217 million of in-year restraint measures and savings being undertaken across government, including Crown corporations, are reflected in the mid-year forecast.

A hiring freeze has been implemented with only hiring for positions considered essential.  The government is also committed to holding the line on labour costs across all sectors of the public service.

“Public sector salary expense across government is now about $6.3 billion a year, so if we are going to control government spending, we have to control labour costs,” Doherty said.

The mid-year forecast shows corporate income tax down $81 million, personal income tax down $172 million, Provincial Sales Tax down $128 million and fuel tax down $20 million compared to budget estimates.  Non-renewable resource revenue is down $180 million from budget, with potash revenue down $141 million from budget primarily due to lower average prices.

Offset somewhat by higher forecast revenue from federal government transfers and other own-source revenue, total revenue is forecast down $322 million from budget.

Higher crop insurance claims and cost pressures in health and social services are projected, offset somewhat by restraint measures throughout government, resulting in total expense forecast up $285 million from budget.

“Government revenue is down and utilization of government services is up—that’s why we have a deficit,” Doherty said.  “Overall, non-renewable resource revenue is down more than $1.2 billion from what it was two years ago.  Meanwhile, Saskatchewan’s population has continued to grow, and that has meant more children in schools, more people using our health system, higher use of our social assistance programs and more people utilizing other government programs and services.

“Saskatchewan’s economy is more diversified than ever before.  However, low commodity prices continue to be a challenge that we must meet with a strong financial plan and an eye to ensuring long-term strength.”

The forecast deficit is prior to accounting for the $236 million net distribution of previous Workers’ Compensation Board earnings to employers and the pension adjustment.

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For more information, contact:

Jeff Welke
Finance
Regina
Phone: 306-787-6046
Email: jeff.welke@gov.sk.ca
Cell: 306-536-1185