Sask. finance minister shares details of provincial budget as Iran war upsets oil prices

Saskatchewan’s finance minister is hinting that the province is still expecting a deficit budget, despite rising oil prices due to the war in the Middle East.

Jim Reiter joined The Evan Bray Show on Friday, ahead of the unveiling of the provincial budget on March 18, to describe the work that goes into preparing the document, some of the province’s priorities for the year ahead, and where Saskatchewan stands financially when compared to other western provinces.

Read more:

• Scott Moe offers more details on shortfall coming in next month’s provincial budget
• Premier Moe hints at ‘challenges’ in upcoming provincial budget
• LISTEN: Energy expert predicts oil shock after Iran strikes will drive prices higher

Listen to the full interview with Reiter, or read the transcript below:

This transcript has been edited for length and clarity.

EVAN BRAY: What goes into planning the budget? This is a long process, I can only imagine, but can you give us just a bit of a behind-the-scenes look at what goes into this?

JIM REITER: It is a long process, Evan. We kind of laugh about it in government, that it essentially starts the day after the budget. Through the summer months, work starts in individual ministries. It flows through into the fall with treasury board meetings, and gets into January, February with cabinet meetings. All the while the finance folks are working hard on it. So it’s many, many months in the making.

“I don’t think you will see a surplus budget from any province in the country this year,” Jim Reiter, Saskatchewan’s finance minister, said during an interview on The Evan Bray Show on Friday. (Lisa Schick/980 CJME)

I can only imagine there’s some struggle in terms of prioritization, because what you’re putting the money on is really what you intend to prioritize. And every ministry has what they would like to see make the budget. You have to make the tough decisions. Are there things being cut that you wish you didn’t have to?

REITER: Yeah, for sure. I remember under our Sask. Party government, our first finance minister was a gentleman named Rod Gantefoer, who I hold in high regard. And he used to always have a saying. He said, “If it was a choice of decisions between good ideas and bad ideas, it would be easy, but it’s usually a choice between good ideas and other good ideas.” So there are some difficult decisions, and then it’s complicated by the fact that our primary expense in the province – as it is in every province – is health care. And obviously we’re never going to underfund health care, so your single largest expenses is one that you don’t have a lot of avenues for cuts. So it’s difficult.

I remember when we chatted last year, Minister Reiter, you were projecting a very, very slim surplus. I think $12 million. And we said it doesn’t leave a lot of wiggle room. Can you give us a sense of where we’re going to end the year? Clearly we didn’t hit that mark.

REITER: We will be in deficit situation. A number of things happened after the budget. And again, like you said, it was razor thin. It was essentially anticipated to be a balanced budget, but we had health-care pressures. I mentioned that a minute ago. We had wildfire costs. We had a really tough wildfire season last year. Then there were some other internal things. There was actuarial studies done on pension plans that drove costs up there that weren’t anticipated. So it was number of things. Now that was all overridden by the by the issue that we’re grappling with right now – and everybody’s grappling with right now – which is geopolitical forces. Trade issues, those kinds of things are affecting the economy and the financial statements for every province in the country.

It’s a fairly big miss. We’re talking millions of dollars. I’m hearing rumors it could be close to a billion. I don’t know if you can shed light on that, but what do you say to the criticism from people that say this is your job to try and and come up with a best estimate of where we’re going to be on the budget, and we missed by a fair bit?

REITER: I would say it’s easy to be a critic in these situations, because the budget is simply a snapshot in time with the best estimates at the time. Perfect example of this: Look what’s going on in the world right now today, with with the conflict in the Middle East. It’s causing all kinds of stresses. Look at price of barrel of oil. Nobody anticipated that a few weeks ago. Hindsight is 20-20. Always easy to criticize. But when you look at it overall, dollar wise, it’s significant money. But when you look in comparison to its budget, well in excess of $20 billion, percentage wise, I think we have to be reasonable. And I would just point out, Evan, that in these difficult times that every province is struggling with, you’ve seen a large deficit in Alberta and a massive deficit in British Columbia. We’re still pretty well positioned. We have the best credit rating in the country. We’ve got the second-best debt-to-GDP ratio, which is a fiscal measure that bond-rating agencies pay a lot of attention to. We’re still well positioned to weather this and protect Saskatchewan art.

I know the details will be released in the budget, but can you talk about the oil projections and how you factored that in last year? Some would say maybe you were a little eager on the price that you had set for oil. Although we’re we’re seeing great oil prices right now, this has been an anomaly. This has not been the norm over the last year. Can you speak about how you factored in commodities for the year ahead?

REITER: Our financial analysts do a lot of work with industry folks to come up with the best estimates at the time the budget is set. We are not going to get carried away with this. Price of oil is high right now, which he lps the revenues of the province, but this could easily be short term. We’re all optimistic that this conflict in the Middle East is not going to last long. So if if it is settled, and potentially the price of oil comes back down again, we’ll see. There was criticism by the opposition last year that we pegged it too high. I’m sure they’ll decide that we either pegged it too high or too low this year. That’s their job – to criticize. It’s our job to do the best estimates we can.

You mentioned, Minister Reiter, things like health-care pressures. You talked about the wildfires. We talk about these things every day on this radio program. When you have years like that, does it set a new watermark? Does the budget structure change to accommodate that? Or do you view them as an anomaly in hopes that maybe that will change for the year ahead?

REITER: It depends on what the what the expense is. In cases like wildfires, folks try to come up with the best numbers they can. Another interesting one, for example, is crop insurance. Some years there’s been significant cost to the budget, some years not. But they do a rolling average, so they don’t necessarily treat it like an anomaly, but not like a new benchmark either. It factors into a rolling average over a period of years, so we think that’s an effective way to do it. Again, a budget’s an estimate. It’s the best estimate at the time. Estimates, by their nature, they’re not going to be bang on, so it’s easy for critics to complain you were too high or too low. But I think anybody who’s ever dealt with budgets, including in their own home, recognizes that things that are unforeseen happen, and you have to be prepared to deal with that.

We’re hearing about large deficit budgets to to the west of us. Alberta has has talked a bit about some of the financial pressures there. Did you have a sense of how other provinces have been faring through some fairly rough waters, unsettled time, volatile markets, all of those things? How are we doing?

REITER: Because we’ve been, all along, positioned well financially, it’s going to help us to protect our economy, to help protect Saskatchewan citizens through these trying times. I look to the west, Alberta, where price of oil hit them hard. You saw a significant budget there. And then you look further west to B.C., which is almost a culmination of all the worst things, they are now backpedaling from promises they made. We don’t intend to do that. They’re they’re raising taxes, they’re raising income taxes, and they still have a massive, massive deficit, which I don’t know if how many years it would ever take them to ever get out of that situation. Thankfully, we are not in that position.

I know the budget itself will be rolled out on the 18th, but can you give us a sense of what some of the themes, some of the priorities might be focused on this year?

REITER: If I could do an overview, I would say these are extremely unsettling times, geopolitically, around the world, with all the trade issues and conflict. We’re well positioned to protect Saskatchewan citizens. We are well aware of affordability issues Saskatchewan citizens are are facing, and we are going to do everything we can to keep our fiscal situation sound and protect this province.

Will we see another deficit budget, or are you hoping for a surplus?

REITER: I would put it this way, Evan: I don’t think you will see a surplus budget from any province in the country this year.

Last question: what about debt? People worry about this federally, and they certainly worry about it provincially as well. When do we start paying down the debt? I’m one of those people who is very debt adverse.

REITER: You’re going to see that addressed in this budget. Debt, sometimes, is necessary, especially for capital things. That’s what builds our schools and our hospitals and our long-term care facilities and our highways etc., and the list goes on, and we need that in a growing province. But the important thing is that we keep that manageable. And I would come back to what I said a few minutes ago, Evan. We have the second-best debt-to-GDP rating in in the country, and we’re going to ensure that we stay rated high.