The final budget of Saskatchewan Finance Minister Ken Krawetz is again a balanced budget.
The 2015-16 surplus is $107 million. Overall revenue is $14.28 billion, up 1.2 per cent, while overall spending is at $14.17 billion, up 1.2 per cent.
The budget was delivered in the legislative assembly Wednesday afternoon by Krawetz, and is the last before an anticipated spring election in 2016.
Balancing the budget posed an obvious challenge for Krawetz, who acknowledged to reporters the impact of a slump in oil prices in an embargoed morning news conference prior to the budget presentation.
“One year ago today the price of oil was just over $100 a barrel. Today it is less than half that, which clearly creates some significant challenges. But at the same time, there are many signs of continuing strength in Saskatchewan’s diverse and growing economy.”
Despite the challenges, “our economy is strong and Saskatchewan is strong.” Krawetz pointed to continuing strength in the potash industry and a change in the Potash Production Tax as helping offset a $661 million decline in oil revenue. Potash revenue is expected to be up by $400 million this year, said Krawetz, and net income from the commercial Crowns including SaskTel, SaskEnergy, SaskPower, SLGA and others is expected to be up $237 million from a year ago.
Despite considerable talk before the budget about raising the education portion of property tax or moving off the one per cent of GST for municipalities, there were no changes to either one.
“As a result of controlling operating spending, I am pleased to say this budget contains no tax increases, and no reduction in revenue sharing with municipalities, which could have contributed to higher taxes at the municipal level.” Krawetz said. “Keeping taxes low is a key element in our plan to keep Saskatchewan strong.”
On revenue sharing, the budget is allocating $265.3 million, an increase from last year of $8.3 million.
The biggest news from a North Battleford perspective was mention in the budget of funding for the new Saskatchewan Hospital.
The budget document specifies “$129.0 million for the Saskatchewan Hospital North Battleford–Integrated Correctional Facility, potentially using a P3 model.” Also mentioned is $64.9 million this year for the Swift Current Long-Term Care Centre, a project using P3 procurement, as well as other initiatives.
News that Saskatchewan Hospital was going ahead this year is not a surprise, as City officials indicated at their planning committee meeting Monday that tenders were being let, and that construction activity was due to start at the site in April. The provincial budget document describes the project, along with others including the Swift Current care facility, Regina bypass, and others including elementary schools, as being in the evaluation phase of procurement.
“There is still work to be done in determining whether this will be a P3 project,” Krawetz said.
“That work is underway right now and the calculations and value for money, and we are working with the three proponents who have been shortlisted, so those kinds of things are still ongoing.
As for the project itself “we are moving forward with it. There will be ongoing capital that will be required in ‘15-‘16, so the sum of money that we put there is just the anticipated costs for ‘15-‘16. There are significant dollars still to be paid in subsequent years.”
With respect to infrastructure around the province, the major announcement in the budget was of the Saskatchewan Builds Capital Plan, described as a four-year, $5.8 billion commitment to construct and maintain core infrastructure such as schools, health care facilities, municipal infrastructure, roads, bridges and highways.
More than $1.3 billion has been earmarked for core infrastructure in 2015-16, up almost 50 per cent from a year ago.
The Sask Builds capital plan is earmarking investment of $581.0 million for highways and transportation infrastructure, up $175.8 million from last year’s budget; $248.5 million in K-12 schools, up $150.6 million; $46.6 million to universities and regional colleges; and $256.4 million for health capital, up $161.6 million.
This is in addition to a projected $2 billion in capital spending projected by the commercial Crowns.
Major Crown capital projects include $1.2 billion at SaskPower, SaskTel will invest $313 million and SaskEnergy will spend $257 million.
The rationale behind the four-year Sask Builds Capital Plan is to take advantage of low interest rates and avoid rising costs down the road.
Krawetz acknowledged the government had a choice — to delay projects or to build. They decided to keep building. Krawetz also acknowledged the sentiment of addressing needs and pointed to Saskatchewan Hospital as one example of that.
“I know the lobbying from the people of North Battleford has been extensive for probably 25 years,” Krawetz told reporters, “that 100-year old facility needed to be replaced. And it wasn’t replaced for decades upon decades.”
Krawetz also pointed to other projects including schools needed. “Putting those projects on hold for years,” said Krawetz, will “probably mean the cost of construction goes up and that the needed facility now is not built.”
In the areas of health, education and social services spending is forecast at $10.4 billion, up 1.9 per cent, and makes up almost three-quarters of the budget in total.
In total, some $5.5 billion is being allocated to health care, $3.7 billion for education spending, up 2.8 per cent, and investments in social services will reach $1.2 billion, up 3.2 per cent.
In order to keep budgeted expenses at $14.17 billion, changes are coming to the Active Families Benefit, Graduate Retention Program and Research and Development Tax Credit.
The Active Families Benefit will be income-tested – available to families with net incomes below $60,000.
The Graduate Retention Program will become a non-refundable tax credit, with post-secondary graduates who stay in Saskatchewan still able to receive the full amount of their tuition back – up to $20,000 – through a reduction in their provincial income tax. They have up to 10 years, instead of seven, to use this tax reduction.
The Research and Development Tax Credit will be fully non-refundable and the rate is being reduced from 15 per cent to 10 per cent of qualifying research and development expenditures.
The income threshold related to the Seniors’ Drug Plan is being lowered as well to $65,515, aligning with the provincial income tax credit, as opposed to the federal threshold of $80,255. The change targets those with lower income, and takes effect July 1, 2015, a savings to the province of about $3 million.
Finally, changes are coming to the Potash Production Tax to defer timing of capital deductions to provide an “immediate and temporary increase in revenue” from potash companies. “The total tax deduction potash producers receive from their capital spending will now be used over a longer period of time,” Krawetz told reporters.
This is an interim step that will be followed by a review of the entire potash royalty and taxation regime. However, according to the budget document, “any further changes resulting from a review must balance the excellent investment and operational environment for this sector, which is so important to the provincial economy, with the need for a fair return for the owners of the resource, the people of Saskatchewan.”
The remaining areas of the 2015-16 Budget expenses are budgeted at $3.8 billion, down slightly by 0.6 per cent from spending in last year’s budget, with 11 ministries and agencies, including the premier’s office, seeing a decrease in their budgets. All out-of-scope employees including MLAs and cabinet ministers had salaries frozen in 2015-16.
In addition to there being no tax increases in the budget, there are two new “growth tax incentives.” The Corporation Income Tax Rebate for Capital Investment in Primary Steel Production will provide a tax incentive for eligible primary steel producers that make a minimum capital investment of $100 million in new or expanded productive capacity. The Manufacturing and Processing Exporter Tax Incentive will provide non-refundable tax credits to eligible corporations that expand the number of their M&P-related full-time employees above the number that were employed in 2014.
