Falling revenue from potash, taxes and Crown land sales is hitting Saskatchewan’s bottom line, but more oil money is keeping the books in the black so far.
The Saskatchewan government said in its first-quarter budget update that stronger oil prices are expected to increase revenue by $92-million. But revenue from Crown land sales is forecast to drop $45.6-million, potash revenue is expected to be down $21.3-million and tax revenue looks to fall by $15-million from March budget projections.
The province still says there will be a surplus of $33-million in the general revenue fund – but that’s about half of what was estimated in the budget.
“We’re on track in many areas,” Finance Minister Ken Krawetz said Thursday.
“The great thing about Saskatchewan, of course, is it’s quite diversified and resilient. Even though there’s volatility in so many areas, Saskatchewan continues to lead the nation in many, many areas and that is a very positive point.”
The first-quarter budget update forecasts revenue to be $11.2-billion – up $11.8-million from budget. Expenses are also forecast to be up $43.6-million to $11.6-billion. Krawetz says that extra spending is for disaster assistance claims.
But economists have warned Saskatchewan’s economic growth is likely to take a hit from turmoil in the potash industry.
Stocks of potash-producing companies plummeted last week when Russian company OAO Uralkali threatened to pull out of a marketing consortium and undercut prices on the world market. The move raised concerns that potash prices could fall by around 25 per cent.
Potash is a mineral used to make fertilizer and increase crop yields.
Saskatchewan is the world’s second-largest potash producer and the province relies on royalty money that it collects from companies that develop the resource.
Krawetz said the province is watching the situation, but it’s too soon to know the specific impact.
“There’s a lot of things that are going to offset something like an unexpected decline in potash,” said Krawetz.
“Potash also only makes up about 4.5 per cent of our budget, so as a result we’re hopeful that cooler heads will prevail in Europe.
“Saskatchewan alone has over 50 per cent of the world’s potash, so we’re a strong player, we’re a very important part of a growing need for potash. The world continues to need our product and I think as cooler heads prevail and that we see what happens, we’ll be able to meet the challenges.”
The Opposition NDP said the financial update doesn’t have enough information.
Finance critic Trent Wotherspoon said the update is based on the general revenue fund, which only looks at departmental spending, not the summary financial picture, which takes into account all areas of government including Crown corporations.
“The auditor has called this kind of reporting misleading and wrong,” said Wotherspoon.
“In fact she’s highlighted the fact that the report put forward today shouldn’t even be brought out without being a summary report, so the numbers simply don’t add up.”