The Saskatchewan government is raising some taxes and trimming spending in a bid to put the budget books back in the black within the next three years.
PST increasing to six per cent
The provincial budget tabled Wednesday includes a one-point PST increase from five to six per cent, effective Thursday.
"We need the revenue," Saskatchewan Finance Minister Kevin Doherty said of the PST increase.
"All the changes that we're making with respect to the shift from tax on income and productivity to consumption taxes is based on our government's intention to get off such a heavy reliance on resource revenues.
"I acknowledge it will put some pressure on families."
PST will now apply to purchases such as children’s clothing, restaurant meals and snack foods, insurance premiums and construction services. The PST hike is expected to boost revenue by an estimated $242.1 million.
So-called sin taxes on tobacco and alcohol are also going up. The tobacco tax will increase by two cents per cigarette beginning Thursday. Starting April 1, wholesale liquor markups will increase by 6.8 per cent for most beer products, six per cent for most coolers and four per cent for most spirits.
Several PST exemptions are also being eliminated. There will no longer be an exemption for bulk gasoline purchases, and the exemption for buying diesel fuel in bulk is being reduced to 80 per cent of purchases.
The exemption for used cars will continue, but the value of a trade-in will no longer be deductible when calculating the PST on the purchase of a new vehicle.
Tax changes expected to generate $900M
The education property tax is increasing to provide 40 per cent of funding to K-12 schools. Personal income tax credits for education and tuition expenses are also being eliminated, along with the Employee Tool Tax Credit.
In addition, the government is suspending the indexation of personal income tax and reducing the Labour-Sponsored Venture Capital Tax Credit rate. The corporation capital tax on large financial institutions is being increased, while the provincial income tax preference for credit unions is being phased out.
It’s anticipated the measures will add $900 million in tax revenue. To help soften the blow of the changes, the annual Saskatchewan Low-Income Tax Credit will be increased by $100 per adult and $40 per child.
According to the government, the PST increases would amount to $711 annually for a family of four earning $100,000, while the income tax reductions would total $2,662. A single person earning $40,000 would pay $130 more in PST annually, while income tax cuts would total $879.
Funding is also being reduced, suspended or eliminated in some areas as the government tries to put the province’s finances back on track.
Budget puts brakes on STC
Saskatchewan Transportation Company will be shut down by the end of May, putting 224 people out of work.
The government notes that ridership has significantly declined and costs have increased over the past decade. STC estimates it would need $85 million in provincial funding to continue operating for the next five years.
"Everything that they possibly could do to improve their revenue base and to get ridership up just did not work," said Doherty.
The head of the Saskatchewan Association of Rural Municipalities says losing the bus company is worrisome.
President Ray Orb says it's a valuable service, especially for smaller communities and seniors.
"For a lot of people, it perhaps might be going to the doctor. It might be somebody from Weyburn that wants to go to the doctor in Regina and can actually get a trip back the same day," said Orb.
"It means for some people, some businesses, being able to send freight from community to community, and agriculture parts, things like that, and I think it's quite important."
Government taking over Wascana Centre
The government has also announced it will take over responsibility of Wascana Centre. It says the change will see a streamlined approach to operations and investments in the park, and will bring stability to the centre’s funding.
The budget also sees the discontinuation of SaskPower and SaskEnergy’s payments in lieu of taxes to municipalities, which currently total $36 million. The government says the change disproportionately affects the City of Regina, and measures will be taken to mitigate that impact.
$685M deficit projected as resource revenue declines
The changes come as the province faces a projected $685-million deficit, in large part due to dwindling resource revenue amid a lingering slowdown in the sector. Revenue from resources has declined by more than $1.3 billion since 2014.
Doherty said raising the PST was not something the governing Saskatchewan Party campaigned on during the provincial election last year.
But no one expected revenue from natural resources, such as oil and gas, potash and uranium, to fall more than $1 billion and stay that low for three years, he said.
"Why didn't we campaign on that? We simply weren't contemplating any changes to the PST at that time," said Doherty.
"The circumstances have changed ... If you don't have that revenue base available to you, unless you're going to run big deficits for a long period of time, then you have to go at it the spending side."
The budget calls for a $250-million cut to public-sector compensation, and includes a previously announced 3.5 per cent wage rollback for ministers and MLAs.
Spending forecast to increase by $342M
Revenue is expected to total $14.17 billion, up $141 million from last year’s budget. Spending is forecast to increase $342 million to $14.80 billion. Nearly three-quarters, or $10.7 billion, of the spending in this year’s budget is earmarked for health, education and social services.
Municipal revenue sharing is expected to total $258 million this fiscal year, and the funding formula will continue to be based on one point of the PST.
Infrastructure spending to total $3.7B
The province also plans to spend $3.7 billion on infrastructure, including $1 billion on highways and roads. Crown corporations – mainly SaskPower, SaskEnergy, SaskTel and SaskWater – will spend $2.1 billion on capital projects, while government ministries and agencies will invest $1.6 billion.
“Capital projects create construction jobs at a time when sectors such as mining and oil and gas are experiencing commodity price downturns,” Doherty said.
“Investing in roads and highways improves safety and helps Saskatchewan products move to markets over an expanded and improved transportation system.”
The budget includes a $300-million contingency to guard against unanticipated declines in revenue, expenses and unforeseen costs related to potential natural disasters, such as flooding and forest fires.
Return to balanced budget expected in 2019
A deficit of $685 million is forecast for this year, followed by a smaller shortfall of $304 million in 2018-19. A $15-million surplus is projected in 2019-20 and a $183-million surplus in 2020-21.
“This year’s budget sets a course to respond to the current challenge and return to a balanced budget by 2019, ensuring government services remain sustainable and affordable in the long run,” Doherty said.
“It controls spending and expands and modernizes the tax system by shifting to consumption taxes and lowering income taxes.”
Budget an attack on families: NDP
The Opposition NDP said the budget is an attack on families.
"I think they're going to say, 'Ow.' That's what average families are going to say," said NDP finance critic Cathy Sproule.
"Even if you want to do renovations to your homes, now that's going to be another five per cent PST because that exemption's gone. Children's clothing ... that's an important reduction or exemption for families.
"There's a number of things in here that are going to hit families really hard."
With files from The Canadian Press
