Tuesday, November 22, 2016

Going for a New Record, Perhaps?

Source: CBC News: Sask. Now Projects $1B Deficit for 2016-2017
Source: CJME News: $1B Deficit Forecast for Saskatchewan by End of April

I did say I would get to the growing deficit eventually.

So, at a time when the Finance Minister Kevin Doherty is arguing with former NDP MLAs and candidates on Facebook, to our Premier effectively calling for a boycott on A&W...It really makes you wonder what other potential distractions are going to come out now that the news has finally confirmed what we've all long feared: Saskatchewan deficit for the 2016 - 2017 year has hit $1 Billion Dollars.

Before the last election, the SK Party was taking an incredible amount of flak for postponing the budget until after the election. The NDP rightfully called them out on this issue, but for one reason or another, voters handed Wall another majority government in the province.

The 2015 - 2016 Budget showed a narrow surplus of $107 million dollars, in March of 2015. Although, it's worth noting, that many commentators were already shaking their head at this figure, given that the government borrowed $700 million and didn't include it as 'debt' in the budget, but most people have already moved on from that.

By November 2015, that $107 million surplus had become a $262 million deficit. By February 2016, the last look at the books before the election, the deficit had grown to $427 million. Wall and Company assured electors that by the time the 2016 - 2017 Budget would be released, the deficit would be back to a manageable $259 million, and that the budget would return to balance come 2017 - 2018.

But weeks after being elected, Wall's comment on the deficit: "“I think it’s going to be higher than that,"and it was with the deficit clocking in at $434 million. Well, given the Sask Party's shoddy record of forecasting economics; for once, Wall was dead right about this one, as it did indeed get much higher.

By June, the deficit was finalized at $675 million. A far cry from the $262 million forecast nearly a year before hand, and still more staggering than the $434 million presented after the election. However, let us not pretend that this was a new experience for Premier Wall and his party.

As Murray Mandryk points out since 2009, four summary budget deficits occurred under Wall and the Saskatchewan Party. A brief refresher for everyone:

Up until 2015 - 2016, Saskatchewan had two accounts that they reported on: The General Revenue Fund (GRF) which accounted for general government revenues and spending. The second was the Summary Financials, which included things like Crown Corporation Debt and the like. Saskatchewan was the only jurisdiction in Canada who presented their budgets primarily on the GRF; where it was easier to present a balance.

It's effectively like saying "Well, we've got $500 in our chequing account and only $200 for bills this month, so we're breaking even!" while you neglect the fact that you've got $20,000 in debt from various other sources at the same time.

In fairness, the NDP used the GRF during the Romanow and Calvert years, so they take a bit of the blame on the way accounts were presented to the province. But, also in fairness, Wall and his party had nine years in office before they saw the need/were pestered enough to officially change the way budgets are presented.

But, back to the modern.

Now, Saskatchewan finds itself staring down the barrel of a $1 Billion dollar debt. And given the history of listed above, one does have to wonder if the buck is going to stop at the $1 Billion mark...Or if the number will continue to climb. Again, given the SK Party record on financial forecasting, I'm not entirely sure we're locked into this number yet.

There is also something to keep in mind: As this deficit grows, Wall and company are hitting a financial record that has stood in Saskatchewan for nearly 30 years: The whopping $1.2 billion dollar deficit of Grant Devine in the 1986 - 1987 budget year.

Much like Wall, prior to an election Devine's team forecasted a modest deficit of $389 million. Devine's deficit, however, grew out of naked self-interest. The government opened the spigot before the election to avoid a potential defeat; and the PCs did lose the popular vote in the province but won the most seats. One does wonder if Devine had shown restraint with tax-payer money, if he'd had gone down as a one-term Premier.

Wall's deficit is a lot more opaque than Devine's.

Doherty has blamed lower than projected resource revenues, especially in oil & gas and potash, as well as decreased tax revenue. And while those are parts of the story, they're only parts of the whole.

The SK Party has been unable to admit when they've made mistakes, and believe me, there have been plenty of them. Things like $1.5 billion, and raising, spent on the Boundary Dam project. A $35 million contract to bring Lean to health-care with questionable results. To a completely questionable land deal that continues to perplex and lead to government stalling to produce any meaningful answers, that has cost at least $22 million if not more.

Yet, Wall and Co. are unable to admit that perhaps they made missteps on these files.

And that brings us to the bigger elephant: Wall is also on track to top Devine's record of being leader when Saskatchewan's overall debt is at its highest. By 1991 - 1992, Saskatchewan's debt topped $15 Billion.

Public debt in Saskatchewan now is expected to hit $15.2 Billion by the end of the fiscal year.

As stated before, yes, the market economy does take some of the blame for this. But, and this is the important bit: We're also coming off some of the best fiscal years Saskatchewan has had since being a province.

When the market was strong, we were taking in record amounts of income. And yet, the SK Party was spending it just as quickly as it was coming in and putting nothing away at the same time. And that, rightfully, is on them.

Saskatchewan stands on the precipice of uncharted territory for our province. Our previous benchmark of "the worst time period in our history" is close to being blown out of the water. And most of us should remember that it took a little over a decade for the province to pull itself back from the brink last time; and that it happened at an enormous cost.

While the SK Party can try and lay the blame as much as they like on anyone but themselves, they have to take ownership of this situation. The market economy only drops so much, it's the government's response that helps determine what happens after the bottom falls out. And so far, Wall and Co. have proven sorely lacking in this area.

I suppose I need to include the standard refrain of during the good times, they were quick to take as much credit as they could. When the bad times started, they started pointing fingers in as many directions as they could.

For years, they were in charge of guiding an unheard of economy in our province. Throughout it all, they were told by numerous sources that they should plan for the future, work on diversification, and be prepared for the eventual bust.

They didn't. They bet the farm on oil & gas, with a side bet on potash, and the dealer ended up having a stronger hand then they did. Unfortunately, for all of us, they we gambling with our money and the debt collector is on the phone.

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