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March 23, 2017SASKATCHEWAN BUDGET 2017-18 The Province of Saskatchewan released its 2017-18 Budget on March 22. Saskatchewan's deficit increased to $1.29 billion in 2016-17 as resource revenues fell short of expectations. The government has instituted a number of significant revenue measures and expenditure reductions to close this gap. The Saskatchewan deficit is estimated at $685 million for 2017-18 and $304 million for 2018-19. Saskatchewan's budget is projected to be back in balance by 2019-20. The Saskatchewan Budget makes a $300 million provision as a contingency for adverse shocks to the forecast. The Saskatchewan Budget also includes a $250 million annual reduction to humand resources compensation funding across the public sector. The expenditures reported in the Budget (and shown below) do not include this $250 million reduction.
The 2016-17 Saskatchewan Budget assumed that resource associated revenues would rebound more sharply. Without this rebound, Saskatchewan's revenues fell $329.5 million below the Budget estimates. Expenditures were also up $524.8 million compared with the Budget estimate, with a large increase associated with of higher crop insurance claims due to poor harvest conditions.
With declining prices for key commodity outputs, Saskatchewan's nominal GDP has declined by over 10 per cent from 2014 to 2016. The government in Saskatchewan now has a larger share of the shrinking economy. Provincial government expenditures were 19.9 per cent of GDP in 2016-17, with a deficit of 1.7 per cent of GDP. Provincial government spending is expected to decline by 1.2 per cent in 2017-18 while revenues grow by 3.4 per cent, improving the deficit to 0.9 per cent of GDP. As Saskatchewan's nominal GDP recovers in the coming years and government expenditure growth is limited to 1.5 per cent per year from 2017-18 to 2020-21, provincial spending is projected to decline from 18.7 to to 17.0 per cent of GDP . Revenue growth is assumed to be 3.5 per cent per year through the remainder of the fiscal horizon.
The outlook for Saskatchewan's recovery from the commodity price shocks of 2014-15 is less optimistic. Real GDP growth is now projected to be 0.8 per cent in 2017 and 2.0 per cent in 2018 - this is well below the average pace sustained prior to the decline in commodity prices. Some commodity price recovery is assumed to lift Saskatchewan's nominal GDP in the coming years: rising by 4.9 per cent in 2017 and by 5.7 per cent in 2018. However, despite price improvements and strengthening demand in export markets, oil and potash investments are assumed to remain below previous levels over the forecast horizon.
Key Measures and Initiatives
To combat a larger than expected deficit, the government of Saskatchewan has announced a number of tax measures to close its fiscal gap:
- Provincial sales tax (PST) rates will be increased from 5 to 6 per cent effective March 23.
- Several PST exemptions will be eliminated. Children's clothing, restaurant meals, snack foods, value-added portions of property renovations, insurance premiums and some oil and gas sector equipment will now be subject to provincial sales tax.
- Fuel tax exemptions for bulk gasoline purchase will be eliminated while exemptions for diesel purchases will be reduced to 80 per cent effective April 1.
- Personal income tax credits for tuition and education expenses are eliminated effective July 1
- Labour-sponsored venture capital tax credits will be reduced from 20 per cent ot 15 per cent starting in 2018.
- Indexation of the personal income tax system will be suspended for the 2018 taxation year
- Tobacco tax rates are increase by 2 cents per unit to 27 cents
- The Corporation Capital Tax on large financial institutions is raised from 3.25 to 4.0 per cent effective April 12
- Higher Education Property Tax mill rates
As an offset to tax increases, the Saskatchewan Budget also:
- Reducing all personal income tax rates 0.5 percentage points on each of July 1, 2017 and July 1, 2019
- Reducing the general corporation income tax rate by 0.5 percentage points on each of July 1, 2017 and July 1, 2019
- Targeting research and development tax credits to smaller and medium-sized innovation companies with a refundable credit (and capping existing non-refundable credit)
- Raising investment tax credit for capital acquisitions in manufacturing and processing to 6 per cent
- Low income tax credit offsets for higher sales tax
There are also a number of expenditure measures to close the deficit:
- The government is planning on a $250 million reduction to human resources compensation funding in each of the next four fiscal years. Although this amounts to approximately 3.5 per cent reduction in total compensation, the specific measures undertaken to achieve it are not prescribed by the Budget.
- Lower school operating funding
- Eliminating the Skills Training Benefit, Student Summer Works programs
- Reduced funding for adult basic education (GED preparation), training allowance, apprenticeship/trade certification commission
- Suspensions of grants for education savings
- Eliminating funding for hearing aid, podiatry CPAP (positive airway pressure) and orthotic supports.
- Suspend Community Rink Affordability Grant, Main Street program, Culture on the Go program
- Reduce regional park funding by 50 per cent
- Closure of the Saskatchewan Transportation Company (bus service)
- Ending the pastures program
- Elimination of the Executive Air Service
- Winding down the Saskatchewan Grain Car Corporation (and offering to sell 900 cars to shortline railroads)
Saskatchewan Budget 2017-18
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