Economist not alarmed by deficit in ‘boring’ budget

An economics professor at the University of Regina says the provincial budget is a “boring” one that does not signal a change in government direction nor introduce anything new.

Not even a $2.6-billion deficit could shock Jason Childs.

“It’s kind of interesting but it’s not unexpected. I can’t think of a single jurisdiction in the developed world that isn’t in the same boat,” Childs said.

“Most of the deficit that we’re seeing in Saskatchewan is driven by a dropoff in revenue. There is some extra spending going on but most of the damage came on the revenue side, not the spending side.”

Revenue for 2021-22 is budgeted at $14.5 billion, well below pre-pandemic levels.

By mid-year in 2019-20, Childs said the province was nearly at balance.

“You’d see spending at about ($15.5 billion) and the revenue matching that roughly,” he said.

“So the fact that expenditures have risen, there’s some of that is due to COVID. Some of that is just inflation. The fact that revenues have dropped in nominal dollars, that’s a big concern.”

The government plans to run deficits in the coming years, returning to balance in 2026-27. Childs believes the government will rely on economic growth to get there as opposed to large spending cuts or tax increases.

Childs said that’s a realistic goal, but achieving it will depend on factors outside the government’s control like how the pandemic’s third wave shapes out and how open the world remains to trade.

The government has budgeted $1.5 billion for its COVID-19 response for this fiscal year. Of that amount, $122.5 million is for health and public safety, with $90 million going to provide testing equipment, protective equipment and operating costs in the health-care system.

Most of the COVID-19 response funding is for “economic support,” totalling $1.3 billion.

Some of that includes $488 million for capital projects, $285 million for the SGI Auto Fund rebate, $200 million for cleaning up inactive and orphaned wells, and $174 million for a SaskPower rebate to customers.

They’re measures that Childs thinks will stimulate the economy.

“Having people with money in their pockets that are ready to spend when the public health measures are lifted is going to make a difference,” he said.

However, he isn’t sure if all the rebate programs had to be broad-based, covering wide swaths of the population. Although, the trade-off with narrowly targeted pandemic aid is it might not be timely enough to be useful.

“I think in very specific instances, they’re absolutely essential. But did everybody need a home improvement tax credit? Maybe not,” Childs said.