Tuesday, February 27, 2007

Sask: Bye-bye rainy day fund? (updated)

Further to previous post on Saskatchewan Finances: What do you do when revenues are rising by at least 7.7 per cent and are better than ever?

Well, if you are this government you start drawing down your savings.
The government did not touch the $887 million in its fiscal stabilization fund "saving account"but Thomson said it will be drawn down by several hundreds of millions of dollars in the budget.
Update: In looking back at past government announcements I came across this news release. First off, it claimes the 2001-02 budget was "balanced." This is false. The provincial auditor showed a $483 million deficit that year. It was simply more accounting trickery from the NDP government.
That release also reminds us of how quickly things can change in the economy.
"The Public Accounts close the books on a very difficult year for the Saskatchewan economy," Cline said. "The combination of drought, falling commodity prices and the global economic downturn meant provincial revenues tapered off from the dramatic growth shown in 2000-01. Lower revenue from oil and natural gas was offset in part by higher federal transfers. Corporation Income Tax revenue was also less, due in part to the economic slowdown but also to the backlog in processing on the part of the federal government and the reduction in rates for small business."
That was just five years ago. Imagine what a slowdown would do to government finances at current spending levels. Since 2002, government spending has increased by a whopping 18 per cent.
Later in the press release, Cline reflects on the purpose of the fiscal stabilization fund.
Cline said the eighth consecutive balanced budget underlines the importance of having a 'rainy-day fund' in the form of the Fiscal Stabilization Fund. "The year-end financial results for 2001-02 highlight an improvement in revenues over what was forecast in the 2002-03 provincial budget. Combined with careful spending, this meant that $131 million less was required than forecast from the Fiscal Stabilization Fund to balance the budget for 2001-02. This leaves us better positioned to meet the challenges for the 2002-03 fiscal year and beyond."
You know what? It wasn't raining in 2002, and it certainly isn't raining now. It's clear the government should change the name of the FSF to NSF -- the "NDP Slush Fund."

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