Regina – Declining oil and potash revenue have hit the province’s finances hard. Recognizing that the oil and gas sector has been hit particularly hard, the province’s finance minister now indicates that public servants will feel the pinch, too, as a result.
“We hear stories all the time in caucus from our MLAs about families in their constituencies, particularly in the oil and gas sector in the southeast, west and southwest, of families that haven’t had a paycheque in 12 or 18 months, of businesses that have gone out of business through no fault of their own, because they’re servicing the oil and gas sector, and that’s dried up,” Finance Minister Kevin Doherty said.
It was with that in mind that he presented the presented the mid-year financial report on the province’s books on Nov. 22.
“Revenue is down significantly from what we anticipated at budget. It is now been two full years since the oil price started to drop in the fall of 2014. Overall, non-renewable resource revenue is down more than $1.2 billion from what it was just two years ago. Continued low oil and potash prices are having an even greater effect on other revenue sources than expected. We’re now seeing the effect of those low prices on personal and corporate income taxes, and on the provincial sales tax,” Doherty said.
The mid-year report showed a $400 million drop in provincial tax revenue. The forecasted deficit for this fiscal year is now $806 million.
Corporate income tax is down $81 million. Provincial income tax is down $172 million, provincial sales tax is down $128 million, and fuel tax is down $20 million, according to the mid-year report, compared to budget estimates tabled June 1. Potash revenue is down $141 million from the budget, primarily due to low potash prices. Some incoming one-time federal money for taking over some dams means total revenue is down $322 million from budget.
Expenses such as health care, social services and crop insurance are up $285 million from budget. A $236 million net distribution of WCB earnings to employers is on top of the $809 million deficit, putting the total deficit in excess of $1 billion.
Government and Crown corporations have found more than $217 million of “in year restraint,” Doherty noted.
“If we are going to control government spending, we have to control our labour costs,” he added, pointing out labour is $6.3 billion per year. A hiring freeze is on the entire public sector except for essential and approved positions.
He said it won’t be easy to address public sector wages, but added, “Workers in the energy and mining sectors, and people working in areas serving those sectors, have been hit hard by the downturn. Government, itself, must show leadership by asking those working in the public sector to help our finances become more sustainable.”
Doherty intends “transformational changes” in next years budget, but does not wish to “shock” the economy.
“Low commodity prices continue to be a challenge we must meet, with a strong financial plan, and an eye to long-term strength,” he said.
Doherty mentioned looking at all aspects of the revenue side of the ledger, but excluded a carbon tax. “A carbon tax, as the premier has said on many occasions, unfairly targets certain sectors that are very, very important to our economy, relative to perhaps other jurisdictions. So we would not be in favour of a carbon tax.”
Asked if public workers would see layoffs or salary freezes, Doherty explained that the level of labour expenditures could not go up until the finances are back in balance. Thus employee groups represented by their unions will want to look at their options to stay within that, be it layoffs, unpaid leave, reducing overtime.
Talking about the pain felt in the oil and gas sector, he used an analogy of a company town losing its principle employer, and how that affects a small town. The oil industry has similarly been affected, he asserted. “It would be very recognizable. People could see the impact on that one particular community because of the shutdown of that plant, its impact on the community and their employment levels.
“That’s, in fact, what’s happening across our oil and gas sector in the province,” he said.
