Lower oil and potash prices and sales impact provincial revenues, but surplus still intact
BY BRIAN ZINCHUK
Lower potash and oil prices have put a half-billion dent into Saskatchewan’s budget forecast, but the province is still forecasting a $485.5 million surplus at first quarter and intends on retiring up to $1 billion in operating debt remains on track.
That’s according to Minister of Finance and Deputy Premier Donna Harpauer, who released first quarter financials on Aug. 31.
Most significantly, the budget forecast oil prices to average US$79.50 per barrel, and for most of the quarter, the price of West Texas Intermediate has been below that, in the US$70s or even US$60s. . .
The surplus is down $532.0 million from budget, largely due to higher non-cash pension expense and spending to fight wildfires and to safely evacuate those impacted by the fires. Lower resource revenue is also forecast at Q1 compared to budget.
Finance Minister and Deputy Premier Donna Harpauer, holding the 2023 budget this past spring.
At first quarter, revenue is forecast to be $19.6 billion, down $123.7 million, or 0.6 per cent, from budget. The decrease is largely attributable to a $528.9 million reduction in the non-renewable resources revenue forecast, primarily due to lower potash and oil prices, and lower-than-budgeted potash and oil sales forecasts.
The resource revenue decrease is largely offset by a combined increase of $405.2 million across all other revenue categories, including Taxation revenue due to ongoing strength in consumption and, as a result, Provincial Sales Tax revenue.
“Saskatchewan’s finances continue to be in a strong position, with a substantial surplus,” Harpauer said in a release. “The forecast, however, clearly demonstrates the need to be prudent and manage spending carefully, as resource revenue is volatile and forecasts can change quickly due to global impacts on prices and production.”
At first quarter, expense is forecast to be $19.1 billion, up $408.2 million, or 2.2 per cent, from budget. The higher expense forecast is largely due to a combined $317.2 million increase in education, general government and finance charges, primarily attributable to a non-cash increase in pension expense, related to actuarial adjustments. An $89.0 million increase, largely to fight wildfires and to safely evacuate those impacted by the fires, is also contributing to the higher expense forecast, at first quarter.
“We will continue to pay down operating debt, as planned. We’re able to do so because higher opening cash balances due to a strong year end in 2022-23 have offset the drop in the projected surplus,” said Harpauer.
“Sticking with our debt reduction plan is important, because paying down up to $1 billion in operating debt this fiscal year, combined with $1.5 billion in debt retirement last fiscal year, is resulting in projected annualized interest savings of $110 million – savings that go directly into supporting priority programs, services and infrastructure for Saskatchewan people,” Harpauer said.
Saskatchewan’s net-debt-to-GDP is projected to be 13.4 per cent at the end of 2023-24 and is currently ranked second-best among the provinces.