Pandemic puts a $2.4 billion wound in the Saskatchewan budget

The global COVID-19 pandemic has created a significant hole in the Saskatchewan budget that will take more than a vaccine to cure.

The reduction in provincial revenues and additional costs related to the pandemic have resulted in a $2.4 billion deficit forecast for 2020-21.

“This is a pandemic deficit, not a structural deficit,” Harpauer said. “Prior to the pandemic, Saskatchewan was on track for balanced budgets last year and this year, and I am confident that as Saskatchewan’s economy recovers, our revenues will also recover and we will get back to balance in the coming years without having to cut programs and services.”

While the 2020-21 deficit is significant, the government maintains it is much smaller than the deficits expected in many other provinces this fiscal year.

Revenue is forecast to be $13.6 billion, down $1.2 billion, or about eight per cent from last year, a result of the shuttering of domestic and global economies to contain the spread of COVID-19, combined with the oil price collapse.

Expenses

The 2020-21 Budget includes $16.1 billion in spending, an increase of $1.1 billion, or about seven per cent compared to last year. This includes record spending on health care, which the government says is vital during the COVID-19 pandemic.

The budget includes the capital plan of $14.2 billion that had already been announced March 18 when expenditures were tabled prior to the COVID-19 state of emergency.

As well, $1.3 billion in expenses from across other government entities is included in the summary budget, for a total of $15.5 billion in expenses, released at that time.

Over the next two years the province will invest $7.5 billion as part of its capital plan, which includes $2.0 billion announced in May to help further stimulate the economy and create jobs.

“These are projects that will result in much needed economic activity and jobs,” Harpauer said. “Saskatchewan is fortunate to be in a strong financial position to make these kinds of important capital investments in every part of our province.”

Pandemic

More than $700 million has been allocated to address the challenges of the pandemic, and a $200 million health and safety contingency has been established.

Prior to the pandemic, the investment in health was $6.18 billion, up $288 million or 4.9 per cent from the previous year’s budget. While the health sector is incurring COVID-19 related costs, the significant year-over-year increase is, thus far, allowing the needed flexibility in the system to manage pressures within the existing budget.

In total $118 million is allocated for hospital equipment, testing equipment, personal protective equipment and operating costs to address the pandemic.

In total, the 2020-21 Budget now includes more than $900 million in new support to fight the pandemic.

This includes an additional $502 million of new expenses forecast after March 18, for COVID-19 related support programs and economic stimulus.

Growth

The government continues to refer to this budget as a ‘pandemic budget’ which it maintains it not structural but caused solely by the impacts of COVID-19.

“Our government is helping support people through the pandemic and investing to stimulate our economy and create jobs. Every province, every jurisdiction in the world has seen its economy and finances hit hard by the pandemic. Saskatchewan is not immune, but we are better positioned than most to provide the support people need to get through the pandemic and see our economy recover and jobs return.”

The government doesn’t include a three-to-five year rolling plan of what it expects the deficits to look like in the coming years.

Building projects

Much of what the government is spending was already announced when the expenses were tabled but it includes new hospitals, schools, highways and municipal infrastructure.

“Since 2008, record capital investment of nearly $34 billion—including $3.1 billion in this year’s budget— has helped build a strong Saskatchewan,” Finance Minister Donna Harpauer said. “This investment in infrastructure will help stimulate our economy, and create jobs as we meet the challenge presented by the global pandemic.”

Investment in 2020-21 represents the first year of an enhanced two-year $7.5 billion capital plan, which includes a $2.0 billion economic stimulus booster shot added in May to further help the economy recover from the impact of the COVID-19 pandemic.

The Prince Albert Victoria Hospital will see a renewal and expansion to the tune of $300 million.

“Plans for the future Victoria Hospital include a multi-storey addition with a new acute care tower, adult mental health space and the development of culturally appropriate spaces in partnership with local First Nations,” Harpauer said.

There is also $15.7 million to continue construction of a new 72-bed, long-term seniors care facility in Meadow Lake and $4 million for diagnostic imaging equipment, including $2.0 million for a new CT scanner in Melfort.

More than 1,000 kilometres of provincial highways will be upgraded, including multiple sets of passing lanes and various safety improvements.

The Crown sector will also see investment into power generation, telecommunication wireless networks and other needed infrastructure.

Debt

Public debt is set to rise to $24. 3 billion, largely in part to borrowing $1.9 billion to maintain services and infrastructure investment.

But Harpauer believes our province can weather this pandemic storm to get back on track.

“Our net debt-to-GDP is among the lowest in the country,” Harpauer said. “We have the ability to invest in the priorities of Saskatchewan people. Our people are strong, our economy is resilient and we have the solid base we need to bring our budget back to balance over time. We will develop a plan to move forward. We faced the pandemic, together. Now we are reopening our province, together. And we will rebuild and recover together.”