REGINA – The Saskatchewan government is painting a picture of the province’s finances that hasn’t looked this bleak in two decades – falling nearly $400 million short of projections from the spring.
Even this early in the fiscal year, history shows it’s unlikely the provincial budget can be balanced, according to University of Regina economist Jason Childs.
“Forecasting natural resource revenues is exceptionally difficult,” Childs said. “That’s why counting on those revenues for program spending is so problematic.”
The first quarter update on Monday projected a $292-million deficit, in sharp contrast to the surplus of $107 million expected when the provincial budget was delivered in March.
How bad is it?
Oil was projected to sell at U.S. $57.15 per barrel, but that hasn’t played out – so the forecast is now adjusted to $49.50, which means a $153 million drop in revenue.
Industry analyst Roger McKnight, who predicts crude will average between $45 and $48 by the end of the year, suggests Saskatchewan was “overly optimistic” from the get-go.
“In fairness to anyone in government making predictions, it’s really a crapshoot right about now,” McKnight said.
READ MORE: Plunging oil prices, wildfire response push Sask. into $292M deficit
Finance Minister Kevin Doherty still promises to finish the year in the black, saying he won’t run a deficit.
“We’re not going to borrow more money and place that on the backs of our children and grandchildren,” Doherty said Monday.
That may have to happen in Alberta, though, where the deficit is nearing $6 billion – boiling down to $1,413 per person in that province, compared to just $257 per Saskatchewan resident.
‘Deficit’ not a dirty word
Doherty promised there wouldn’t be any knee-jerk reactions in an effort to line up the books, but Childs argues that achieving a perfectly balanced budget every year isn’t necessary.
“When your main export tanks, it’s probably a reasonable time to be looking at running a deficit while you transition to the new reality.”
With a return to $100 per barrel of oil nowhere in sight, it’s looking much more like the new normal.
WATCH BELOW: Global’s Teri Fikowski explains why volatile energy prices and natural disasters are blamed for pushing Sask. into a forecast deficit of $292 million