Mandryk: Big deficit requires unpopular choices

By Murray Mandryk

The bad news in Finance Minister Donna Harpauer’s mid-year 2021-22 budget update was all too apparent.

This year’s projected deficit is now $2.71 billion — the largest such annual deficit in Saskatchewan’s 116-year history.

Spending is now a whopping $19.6 billion. That’s roughly $2.5 billion more than budgeted in the spring and a staggering $4 billion more than the initially planned for 2020-21.

Admittedly, we all expected a staggering deficit this year because sometimes, that is the government’s only choice.

Government cannot always be run like a business, as the old adage goes.

Mostly, governments are in the business of the broader public good that requires it to invest in things that that no profit-minded business would ever undertake. (This is a big reason why we have Crown utilities in Saskatchewan.)

Also, government isn’t just there to take care of the disadvantaged. Occasionally, others who are normally getting by need a bit of help because they have run into a bit of bad luck.

This happened a lot in the 1980s when drought required sizeable farm support programs and when high interest rates were the justification for homeowner support programs that morphed into home-improvement grants.

Sure governing is always about spending choices by government. And, as history surely tells us, governments don’t always make the right ones.

But other times like the current global pandemic, it’s been case of governing politicians thrust into situation where there has been few other options than run a deficits to support public needs.

It underscores three important realities:

First, in good years it’s important to pay down debt or create surplus rainy-day funds for the inevitability that bad years are likely to come. There was some modest debt-paydown in the early years of the Saskatchewan Party government, for which we should be somewhat thankful. Unfortunately, it was enough, and the idea of a Heritage Fund largely based on surplus natural resources earnings didn’t get much past the discussion stage.

Second, in all years — good, bad and average — it’s critical to weigh all spending decisions appropriately.

The closer governments get to elections (especially elections expected to close), the worse their spending choices tend to be. This was evident in the last election with SGI rebates, but it’s always apparent. Consider the 2007 decision by the last NDP government to give all seniors free prescription drugs — whether they could afford to pay for their own drug costs or not.

And, third, while none of us like to pay additional taxes or additional fees, they are necessary because money has to come from somewhere.

This takes us to not only the reality outlined by Harpauer last week but what will be the likely consequences.

Harpauer noted the the larger deficit could be somewhat attributed to COVID-19 that’s caused a quarter-billion-dollar increase in Ministry of Health costs.

However, the Finance Minister was rather blunt in her explanation that the biggest problem was an additional $1.8 billion in crop insurance claims that resulted in a total indemnity forecast to $2.4 billion.

When you added an additional $293 million for the livestock support program, and it does appear she has a case.

This didn’t go over big with some farmers who saw Harpauer blaming them for the deficit.

In reality, all deficits are years the making — the result of past costly choices. Decisions like the Global Transportation Hub and Regina bypass are likely to haunt this government.

But Harpauer is not wrong to suggest that the crop insurance payments during this year’s drought were an expected unexpected problem. Nor is it unreasonable to think higher premiums will be needed to address them.

The budget is a problem for farmers, but it’s a problem the rest of us share as well — whether we like it or not.

This deficit has be to dealt with.