It might not have been quite as bad as we feared.
Nevertheless, Finance Minister Ken Krawetz’s mid-year update of the 2014-15 budget offered signs that things aren't quite as rosy as his Saskatchewan Party government has been suggesting.
One might even call it an omen.
Just as Krawetz was announcing Saskatchewan’s oil revenue would be down a manageable $40.5 million from the March budget projection, an OPEC meeting in Vienna announced there would be no quotas putting further limits on Middle East oil.
Immediately, that caused a $7-US-a-barrel drop in prices to a four-year-low for West Texas Intermediate of around $64 US a barrel. And while oil has slightly rallied to around $67 US a barrel, no one is realistically anticipating a large record.
In the mid-year finance update, oil is pegged at an average price of $95 US a barrel for this year and an average price of $83 US a barrel for 2015.
While both Krawetz and his officials insist this is simply based on industry averages, it’s considerably more than the Alberta finance ministry’s recently revised forecast of an average $75 US a barrel price in the coming year.
Admittedly, we sometimes make a bigger deal out of the oil production than it really is.
For starters, oil only accounts for 12 per cent of overall Saskatchewan budget revenues, while oil makes up about a quarter of the Alberta government's finances.
Krawetz also points out that a sliding Canadian loonie below 90 cents means oil sales to the U.S. improve dramatically, somewhat offsetting the loss in oil price.
The mid-year update also pointed to improvements in projected potash revenues of $56.1 million and $82.4 million more in Crown land lease sales.
Together, it has produced a $70.9-million surplus in the summary financial statement budget that includes the Crown corporations, not exactly the end of the world, considering how few provinces (including Alberta) have been able to keep their budget in the black.
This is partly due to Krawetz’s ability to keep spending in line. Of the 28 line departments, 22 were still on track to spend exactly what they said they would be spending in the March budget.
In fact, overall spending only increased by a modest $126.9 million, the bulk of which ($107 million) has gone to flood relief.
But those who don’t see this as bad news may not be looking hard enough at the numbers.
Besides the fall in oil revenue and overly rosy expectations of oil price recovery, there is the messy matter of getting $82.4 million in Crown land lease sales. As many rural folks already know, lower prices also translate into less revenue from exploration.
And relying on the ever-volatile potash industry to make up the difference is never a great idea.
However, even more worrisome is a major drop in tax revenue, $33.7 million less in individual income tax and $101.6 million less in corporate tax revenue from March budget estimates.
Krawetz and his department have explained they might have been overly optimistic in their estimations of both. When it comes to individual income tax, less grain moving was certainly one factor. As for the slide in corporate taxes, finance officials speculate it might have been caused by companies taking advantage of tax breaks.
But with some 18,000 more working people in this province and record low unemployment, it’s more than a little strange to see a dip in either.
Moreover, we are also seeing overall public debt creep up from $21.3 million to $11.86 billion.
And based strictly on the core budget of line items, we now see a $122 million deficit in the “core financial plan,” the equivalent of the old General Revenue Fund.
Again, it’s not the end of the world. But it’s not quite as good as the Sask. Party government makes it out to be.
