Imagine if your spouse worked in sales, had a really good year and brought home a $10,000 bonus.
Would you start counting on such a large bonus each year or would you budget responsibly and dream of what to do with the money if it happened again? It’s probably fair to say most responsible households would only count on the spouse’s salary and hope the bonus came again in the future.
Yet, when it comes to revenues the Saskatchewan government receives from oil, potash and other resources, some people want the government to spend money as if every year were a bonus year. There is always an endless list of special interest groups seeking more and more spending.
That’s simply not responsible.
Recent volatility in potash revenues reinforces the need for prudent budgeting.
At the end of July, the government’s revenues from potash sales came into doubt as a Russian potash firm pulled out of a potash cartel and caused musings they would start to undercut competitors. So what does that have to do with Saskatchewan?
Well, the end of the cartel could lead to lower prices as companies compete more with each other for market share. That could reduce potash sales by Saskatchewan companies and lead to lower royalties paid to the Saskatchewan government.
Some are saying it could be a drop by as much as $150 million or approximately 1.3 per cent of total government revenues.
This problem is reminiscent of what happened back in 2009-10. The government tabled a budget that year that counted on $1.9 billion in potash revenues. However, demand for potash dropped like a rock after the budget was tabled and potash revenues evaporated.
Those two potash shocks in just five years reinforce the need for the government to spend prudently and avoid the mistake Alberta made with its resource boom; treating too many years like big bonus years.
It’s good the Wall government has taken many steps to try and find savings within the provincial government budget. For example, their 2013 budget notes that by the end of this fiscal year they will have reduced the size of the bureaucracy by more than 1,900 positions over a four-year period.
In health care the government announced a new partnership for linen cleaning services that will save taxpayers $93 million over a ten-year period. Last year the government announced the end of the film subsidy program; a move that will save taxpayers millions more.
These are all good steps to help control spending, but the government should do more.
For example, the government, and arms length bodies, should start putting new employees in less costly pension plans. This is something the NDP government did during the late 1970s and early 1980s, but there are still some workers in the expensive type of plans (health care workers being one example.)
Another example would be to pursue more partnerships with the private sector. If the government can save $93 million through a linen cleaning partnership, imagine what other possibilities are out there? Hospital custodial and security services, payroll administration and provincial park maintenance are a few that come to mind.
Continuing to cut back handouts for other businesses should also be a consideration (such as the subsidies for labour sponsored investment funds.)
One thing is clear, the unpredictability of potash and other resources shows once again the need for prudent budgeting. That’s something you can bank on.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation
