opinion
One of the most reliable signs of spring in Canada used to be federal and provincial governments unveiling budgets featuring grandiose new five-year plans to reduce their deficits.
There were also, of course, elaborate explanations about why the previous year’s five-year plan didn’t work out and had to be changed.
This spring, however, the Saskatchewan government broke with tradition by sticking to its previous plan. It had actually succeeded in meeting its target for deficit reduction, according to a schedule that was designed to achieve a balanced budget by 1996.
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From a deficit of $842 million in the 1991-92 fiscal year, the “balanced budget trajectory” runs through a 1992-93 deficit of $592 million to a 1993-94 deficit of $294 million, a planned 1994-95 deficit of $189 million, and a 1995-96 deficit of $70 million before attaining a $20-million surplus in 1995-96.
Financial analysts were quick to commend the government on sticking to that schedule, and the provincial finance department was equally quick to pass around copies of the analysts’ praise.
Nesbitt Thomson said the government’s responsible policies have “resulted in a dramatic turnaround that leaves Saskatchewan on target to be the first province to enjoy the benefits of a budget surplus and a declining trend in debt levels.”
Other analysts agreed with Nesbitt Thomson that the province is likely due soon for an improved credit rating, enabling it to issue bonds at lower cost.
That’s good news in itself, and for the example it sets for other governments that are struggling with deficits and accumulated debt.
Like farmers, however, the province’s finances remain vulnerable to interest rates and the value of the Canadian dollar. Higher interest rates would make it more costly to finance the provincial debt, which on a per capita basis is the highest in Canada, and a stronger Canadian dollar would mean the province’s resource producers would earn less from exports.
Another potential vulnerability is Saskatchewan’s heavy reliance on federal transfer payments. Slightly more than a quarter of the provincial government’s total revenue comes from transfer payments, and this would be threatened if the federal government starts cutting such payments.
Saskatchewan, like many farm families, is with much effort making slow, steady progress on the path back to profitability, but that progress depends on supportive national policies. Saskatchewan politicians and organizations need to keep in close touch with their federal representatives.
