From Newstalk 650
In a news conference at the legislature on Tuesday, Finance Minister Ken Krawetz acknowledged the government has been saved from a deficit in part because of that one-time transfer from the feds.
"There would be other things that we would be looking at in terms of expense management absolutely. I mean that's the benefit of a mid-year projection. We're able to look at all of the sources that provide additional dollars and we're able to look at where we're able to adjust expenditures" he said.
He admitted the heavy reliance on resource revenues continue to make the province vulnerable.
"There will be challenges for the financial planning for 2013-2014 and beyond." Provincial debt is staying on track at just under $4 billion, yet Crown debt -- particularly at SaskPower --continues to rise.
So the province has a "balanced budget" because of a one time transfer from the feds. Actually, $95 Million to be exact. Oh, and remember the surplus is $12 Million.But the numbers also show that Crown debt has increased from $4.4 Billion to $5.3 Billion since March. But according to the way accounting is done:
From the Government of Saskatchewan
* Some Crown corporations and other organizations have obligations to other
entities. The General Revenue Fund is not responsible for this other debt.So the General Revenue Fund is not responsible for this other debt. That is fine, but then do not count the use of Crown money on the revenue side if you do not use Crown debt on the liability side. And we should note that that there was a $47.7 Million increase from Crown transfers to the General Revenue Fund. It seems like we are paying down the mortgage, but increasing the line of credit to fund capital expenditures. At the end of the day, taxpayers in Saskatchewan are being saddled with more debt.
So we need $142 Million of extra cash to get to a surplus of $12 Million.
I like Brad Wall, I voted Sask Party last election. But I don't like when the numbers are played around with. Tell us the truth. I guess it does not matter what party is in, the little guys get screwed and lied to.
Just for those who are wondering, we can see in the next few graphs total debt has shrunk from over $12 billion in 2004 to just over $8 billion in 2011. From 2004 to 2007, the NDP paid down about $1 billion in debt, while the Sask Party has paid down about $3 billion since 2007.
Total debt has increased since 2009. Once 2012 is done, I will add the new numbers to the graph.
Here is how it looks
when we break down debt from Crown corporations and debt from the General
Revenue Fund.
Here is Potash
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Also, rather than funding the UofS with cash, they forced it to borrow 100 million which the province pays the interest on.
ReplyDeleteIn this case, the accounting is actually fairly representative of the economics.
ReplyDeleteWhen you take on debt to make capital expenditures, this does not put you in a deficit position. This is because if I buy a piece of capital equipment for $100 that will last thirty years, it would be deceptive to expense it immediately and pretend that somehow I made a loss in the first year and then a profit over the next thirty.
Power companies make this type of capital expenditure all of the time. To do so, they take on debt. This does not necessarily mean that they are increasing their level of risk, and it does not necessarily mean that they are borrowing for the purpose of making distributions. Instead, this is generally standard practice with power companies. If you look at the financial statements of many public power companies you will see the same activities (funding capital expenditures with debt while making distributions from operating cashflow). Saskpower has maintained the same gearing (debt to equity ratio) over the last two years at 63%, which is very reasonable for a power company. They have made considerable capital expenditures, but despite this they have maintained a very strong 13% return on equity. In my opinion, this means that they are probably charging too much to customers and their target return on equity is too high, but what it certainly does not mean is that they are taking on debt on behalf of the government that will be supported by taxpayers in aggregate (as opposed to ratepayers) in the future.
It is always worthwhile to be a skeptic when it comes to government accounting, but from time to time what is done is reasonable.
In my haste, I should have also added that the Government took $56 Million out of the rainy day fund to get to a "balanced budget". And the one time resource surcharge of $123 Million helped as well.
DeleteIf resource revenue does not turn the corner, there will be more challenges for "balancing the budget next year.
I guess if I was in their shoes I would move money around "to balance the budget" as well. The majority of people see headlines such as "Saskatchewan only province in the black", "Saskatchewan only province to balance the books". But these same people will most likely not see HOW the budget is balanced.
The big picture is that resource driven revenue is falling and overall debt is climbing. This should be concerning for all.