To no one’s surprise, the 2017 provincial budget was a tough one.
As expected, consumption taxes are going up to address the budget deficit, pegged at $685 million for 2017-18.
The budget projects that number is expected to go down to $304 million for 2018-19, and be eliminated entirely in two years, with surpluses of $15 million projected for 2019-20, and $183 million expected in 2020-21.
To bring the budget to balance, there is a lot of pain along the way, including the expected hike in the PST, cuts to tax exemptions and government programs, and reductions to public service pay.
“Our budget challenge is clear. We must move away from our reliance on resource revenue, we must return the budget to balance,” said Finance Minister Kevin Doherty to reporters in the pre-budget conference call.
“Our plan will return the budget to balance by controlling spending, modernizing and expanding the tax base and ensuring our economy remains strong.”
The big news from the provincial budget is the hike in the provincial sales tax. As of midnight it goes up one point, to six per cent.
Moreover, the PST is being expanded to include several items that are now exempt. Added to the levy are children’s clothing, restaurant meals and snack foods, insurance premiums, construction services and permanently mounted equipment used in the resource sector.
Also going up is the education property tax, which is increasing to provide 40 per cent of funding to K-12 education.
Among the exemptions being eliminated is the one for bulk purchases of gasoline. The exemption for bulk purchases of diesel fuel is being reduced to 80 per cent of purchases.
The exemption for used cars will stay, but the value of a trade in will no longer be deductible in determining the PST on the purchase of a new vehicle.
Unsurprisingly, tobacco tax rates are increasing as of midnight, March 23, from $.25 to $.27 a cigarette. As of April 1, wholesale liquor markups will go up across the board between four and 6.8 per cent.
Personal income tax credits for education and tuition expenses and the employee tool tax credit are being eliminated.
Indexation of personal income tax is being suspended.
The labour-sponsored venture capital tax credit rate is reduced from 20 to 15 per cent.
And the corporation capital tax on large financial institutions is rising from 3.25 to four per cent, while the provincial income tax preference for credit unions will be phased out.
The government is projecting these measures will add $900 million in incremental tax revenue.
But while PST is going up and being expanded, the government is going forward with its shift away from taxes on income and productivity. They say they will be lowering personal and corporate income tax rates and introducing new growth tax incentives.
The budget will lower all three Saskatchewan income tax rates by a half point on July 1 of this year, and by another half point on July 1 of 2019.
Also, to mitigate some of the tax changes, the annual Saskatchewan low-income tax credit is being enhanced July 1 by $100 per adult, from $246 to 346, and $40 per child from $96 to $136.
In addition to the tax changes, the other big news from the budget is some major cuts in some areas. The biggest is the announcement by the province they are winding down Saskatchewan Transportation Company by the end of May.
The reason cited is the increasing cost. Doherty explained that a decade ago the STC subsidy was $25 per passenger; now it is $94.
“$85 million would have been needed from government to continue operating STC for the next five years. Given other priorities such as health care, education, social services and infrastructure, (the) STC model has simply become unsustainable.”
The finance minister also confirmed the news that was already reported that the government is winding down the Executive Air Service, a move expected to save up to $1 million annually.
Health care services will be seeing changes. Services available in the private system are being phased out by the health regions. Those include the Hearing Aid Plan, podiatry services, continuous positive airway pressure (CPAP) generators and low‐cost orthotics.
Coverage for low‐income residents will be provided by government, but chiropractic services will no longer be covered for anyone.
The graduate retention program remains, but the First Home tax credit plan for recent grads is suspended.
The Community Rink Affordability Grant has been suspended. Funding to regional parks is reduced by 50 per cent. Funding to Meewasin Valley Authority is going down $409,000.
Also, there are changes coming to Wascana Centre Authority, as the government is assuming responsibility for it and integrating it into the Provincial Capital Commission.
Funding to regional libraries is being decreased by $3.5 million, and funding for Regina and Saskatoon public libraries is being eliminated, for a reduction of $1.3 million.
And the Saskatchewan Advantage Grant for Education Savings (SAGES) will be suspended effective Jan. 1, 2018.
For 2017, municipal revenue sharing is $258 million, and maintains the formula based on one point of the PST.
But SaskPower and SaskEnergy’s payments in lieu of taxes to municipalities will be discontinued, with the government retaining approximately $36 million. Because the change disproportionately impacts Regina, measures will be taken to mitigate that impact.
One area that is not going to see a significant change is school boards. The government confirmed they have accepted the final report of the Advisory Panel on Education Governance Renewal, and that means keeping elected school boards as well as no major school division boundary changes.
While the finance minister acknowledged going through with the changes might have saved money, he said the feedback to MLAs, and especially to rural MLAs, was overwhelmingly against changes to the boards.
“The grassroots in reporting back to MLAs and … MLAs came back and said there’s no appetite for this,” said Doherty to reporters. “And the premier heard it and the premier said we’re not going down that path.”
The public sector was also addressed in the 2017 budget. The budget calls for a $250 million, or 3.5 per cent, reduction for compensation across the entire public sector starting in 2017-18 fiscal year.
The premier, ministers and MLAs are taking a 3.5 per cent pay cut and staff in the premier’s and ministers’ offices will take nine unpaid days off a year, reducing their pay by about 3.5 per cent.
But the province is also seeking to achieve 3.5 per cent compensation savings across government through negotiations with the unions that represent in-scope employees. The 3.5 per cent savings will also be required of government out-of-scope employees.
There are a few areas of the budget that touch on the Battlefords and Northwest region directly, and one involves oversight of the oil and gas industry, important in the wake of the recent oil spill incident into the North Saskatchewan River.
The Petroleum and Natural Gas Division of the Ministry of Economy, the provincial regulator of oil and gas activities, will receive an additional $1.4 million and 13 full-time-equivalent positions. It includes start-up funding for a multi-year Pipeline Regulation Enhancement Program (PREP), an increase of field inspectors in ministry offices in Estevan, Swift Current, Kindersley and Lloydminster; and expanding of the technical capacity of the ministry to support climate change commitments related to upstream oil and gas.
Also, the 2017-18 highways and infrastructure budget includes a commitment to begin planning for passing lanes on Highway 4 north of North Battleford.
Finally, the Crime Reduction Committee chaired by Battlefords MLA Herb Cox will see its report released in the coming weeks, and $1 million has been allocated towards initiatives to respond to the recommendations.
Overall, revenue is forecast in the budget at $14.17 billion for 2017-18, up $141 million from last year, but also up $471 million from their third-quarter forecast that was released budget day.
Expenses are pegged at $14.80 billion, up $342 million from last year’s budget, but down $183 million from the third quarter forecast.
A $300 million contingency has also been built in against unexpected year revenue declines, potential expense pressures due to higher use and unforeseen costs for disasters such as flooding or forest fires.
For full details about the provincial budget, those can be found at www.saskatchewan.ca.
