Provincial Budget 2015: Municipalities to keep full revenue share

March 23, 2015 7:56 am
Julia Dima

The 2015-16 Saskatchewan provincial budget was announced last week, and while the provincial government had been cautioning that it would be a belt-tightening year because of lost oil revenue, the budget did not cut as sharply as expected.

Though the revenue sources in the budget were different from traditional revenues, like non-renewable resources, and there were no massive budgetary increases anywhere, there were more moderate increases than decreases.

Moosomin MLA Don Toth says that overall, the budget will be good for individuals.

“The budget presented today reassured the people of Saskatchewan that (we) are not going to dig into their pockets to try and address the economic shortfall as a result of oil . . . While there were reductions in a number of ministries, key areas like health, education, infrastructure, municipal government all saw moderate increases,” Toth says.

The revenue share to municipal governments was something municipalities were expecting to see a cut to with reduced non-renewable resource revenue, which is down $181 million or 6.9 per cent from the 2014 budget. Despite that, the province’s overall revenue went up moderately by 1.2 per cent to $14.28 billion. That is because revenue from taxation is up 2.8 per cent or $183.7 million from the previous budget.

“Last year, we had the consumers of Saskatchewan spend more money buying commodities in the province . . . and as a result of this increased consumer spending, it put more money in taxes, which translated into an increase in revenue,” Toth says.

The increased revenue means that there is an increased revenue share to municipalities, which is calculated as 1 per cent of the 5 per cent PST.

In 2015, $265.3 million will be provided to municipalities through revenue sharing, up 3.2 per cent from 2014.

The provincial budget saw no tax increases, which Toth says he was happy to see in a fiscally tight year.

“We could have raised taxes. But that would have been bad for Saskatchewan people and bad for the economy and this budget is about keeping Saskatchewan strong,” said Minister of Finance Ken Krawetz in his budget address.

“As a result of controlling operating spending, this budget contains no tax increases. No personal tax increase, no business tax increase, no education property tax increase, no increase to the fuel tax, and no reduction in revenue sharing with municipalities, which could have contributed to higher taxes at the municipal level.”

Krawetz noted that education mill rates have no been adjusted for inflation over several years, and will not be adjusted in this year’s budget, and around 65 per cent of funding will come from the government with only 35 per cent coming from property taxes. Krawetz noted that if future budgets are as fiscally restrained as this years, this may change.

“While there is no increase this year, rebalancing may be necessary in future years, in order to ensure a sustainable and equitable funding base for the critically important education sector,” Krawetz said in his address.

Within the education budget, spending will be increased by 2.8 per cent to $3.7 billion. Advanced education saw a massive increase to infrastructure funding of $46.6 million, or 43 per cent increase from 2014. This is because of some large projects including a $10.6 million expansion for the Southeast Regional College’s Weyburn campus.

For the Southeast Regional College (SERC), there was more coming out of the budget than just the money for Weyburn. Bracing for a tight budgetary year with zero or less than one per cent increases in the budgets from the Ministry of Advanced Education and Ministry of Economy, SERC President and CEO Dion McGrath said the budget far exceeded the college’s expectations.

“We were planning for a zero increase in operating and a one per cent increase for our skills training, and the government exceeded all of that,” he says. McGrath says the large committment from Advanced Education for the expanded and renovated Weyburn campus is the largest investment from the college, but across both the Ministry of Advanced Education and Economy which have budgets for SERC, smaller increases are making an impact.

From the Ministry of Advanced Education, there has been a one per cent increase in SERC’s operation budget, or around $35,000, according to McGrath. $77,000 has been allocated for encouraging scholarship matching for the various programs, and a one per cent increase in English as an Additional Language Programming, which translates to about $1,400.

McGrath says these increases are all coming in the face of expectations and plans for zero per cent increases across the board.

“We are delighted with the outcome. We were—based on comments from elected officials leading up to the budget—preparing for a zero type of budget, so anything above that is a bonus and tremendously appreciated,” he says.

From the Ministry of Economy, McGrath says there has been a very large increase to funding for adult basic education (ABE)—a $600,000 province-wide increase—and $42,000 of that will go directly to SERC, for an increase in the ABE budget of 7 per cent.

The other thing SERC was watching in the provincial budget was a change in the Skills Training Allocation from the Ministry of Economy.

Two full-time programs at the Moosomin campus may not be available next year because of shortfalls in that budget, the office education program, and the electrical program.

McGrath said that this was based on receiving a one per cent or less increase to the budget, and if funds can be reallocated from somewhere else within the college’s budget.

McGrath said after the college knew what it would receive in the budget, it would look internally to see if enough funds could be reallocated to bring the electrical program back into the fold—the program costs around $100,000 to operate each year.

Instead of a one per cent increase, the Skills Training Allocation saw a two per cent increase, or an extra $27,000 for SERC.

“This is very positive, but it doesn’t solve the issue that we are continuing our work internally on to find additional savings in that pool of funds so we can reallocate as well,” McGrath says.

“We had budgeted for half of that. So, they exceeded our expectations, so out of a $100,000 program, finding just $70,000 is a little easier to find, and every little bit helps. This goes a long way to filling the gap, but we still have a long way to go.”

McGrath says by April, the college is hoping to have finished searching for funds to reallocate internally to determine if the program can continue in Moosomin.

One change that may have local impacts is the interim changes to the potash production tax. The changes mean potash revenue is expected to be up by $400 million, but the result for the mines is a decrease in pre-tax earnings as part of the production tax. For PotashCorp, that is a decrease of $75 to $100 million.

“It’s too soon to say what the actual impact of this on the ground might be. We have just learned about this, we know mainly big picture it will cost $75 to $100 million in the first year, but beyond that, we have not wrestled with what the fallout will be,” says Randy Burton with PotashCorp. “It maybe it means lower net income, or the senior management or Board of Directors will look at efficiencies across the company, but we can’t say at this time where it is going to fall.”

One potential shortfall could be a reduction in the amount that PotashCorp invests into community initiatives.

“Broadly speaking, we devote about one per cent of pre-tax earnings to community investment across the company, and depending on the year, it comes in at around $27 million,” Burton explains.

“Big picture, if our net income declines a bit, presumably, that will be reflected on what we can spend on community investments.”

But he does not believe that is likely, as there are many places to look for efficiencies before reaching site level where mines give into their local communities.

“By the time you get down to the site level, I don’t think you are going to see a major impact on things like that, and certainly it’s our hope that we can continue with that—we are not going to be going there first, we want to support the communities as much as we can.”

Burton says that although PotashCorp understands the fiscally difficult situation of the province and the importance of bringing in another $400 million in potash revenue, the taxes are higher in Canada than anywhere else for the industry, and a changing tax structure without more notice impacts current operations.

“We are nearing completion of a $6 billion investment in Saskatchewan which was based on the existing tax structure remaining in place,” said PotashCorp President Jochen Tilk. “Changing the rules midstream impacts the ability of our shareholders to earn a fair return on their capital and undermines Saskatchewan’s relative competitiveness.”