Sask. budget 'on track' to balance by 2019-20, but potential hurdles loom: Finance minister

Saskatchewan's minister of finance says oil prices, negotiated public sector contracts and natural disasters could get in the way of the province's three-year goal to balance its budget by 2019-20.

"We're setting that goal and that's what we're going to aim for," said Donna Harpauer. "I think the fact that we've reduced this deficit from $1.2 billion down to where we have now shows our commitment."

The ministerreleased the government's mid-year financial report Thursday morning.

It projectsa $348.3-million deficit for the end of the 2018-19 fiscal year, which is $17 million less than what it initially predicted in the budget.

It is, though, higher than the first-quarter deficit forecast of $306.1 million. The difference is due to an $8.8 million rise in spending and a $33.4 million decrease in revenue.

The government said the deficit is less than the budget predictionin part because of modest improvements to the economic activity in the province and higher forecast revenues.

The province saw a $138.1-million spike in revenue due to higher resource revenue, net income from its businesses and federal transfers.

Harpauer said potash revenue was higher than projected, as were oil and natural gas revenues.

Other non-renewable resource revenue is forecast todecrease by $22.2 million due to lower than expected uranium sales, afterindefinite suspensions of mine operations at McArthur River and Key Lake.

She said the budget deliberations are underway and in order to get to balance, she will ask ministriesto find efficiencies.

"Hopefully like our last budget didn't have to do any dramatic measures. The economy had picked up and it backfilled what we needed. It was kind of a boring budget, and I think I like that."

Oil differential concerning

Harpauersaid the currentlight-heavy oil differential is something she is monitoring closely.

About 60 per cent of the oil produced in Saskatchewan is non-heavy and sells above the Western Canada Select (WCS) price.

The province is forecasting the differential between the lower WCSprice and higher the West Texas Intermediate (WTI) price at 38.1 per cent for the remainder of the fiscal year.

The mid-year report says higher WTIprices and a lower Canadian dollar, relative to budget assumptions, offset the oil differential.

"We're in uncharted territory. We're seeing a differential we haven't seen in a long time. It's concerning," Harpauer said.

The finance minister said getting stalledpipeline projects off the groundwould improve the situation.

"Today is the two-year anniversary of when the federal government approved the Trans Mountain pipeline and nothing has happened."

NDPraises concerns over debt, tax increases

NDPLeader Ryan Meili said the government's decision to increase the PST from five to six per cent, and its expansion, has had a negative impact. The changes have, for example, stalledhousing starts and driven car sales down,he said.

"We see a debt that's now tripled in the space of four years, continues to grow by $2 billion year over year that is obviously a very significant concern," Meilisaid.

• Rising government debt worries Sask. Opposition

The province's mid-year update also projects higher expenses, up $121.1 million from budget day. That's due to an increase in money spent on pensions,health services and forest-fire operations, along withcaseload increases in child and family services, and pressures on custody services in corrections.

"Exactly what we've been sayingthis austerity approach will end up costing them in health, social services and corrections, and that is coming home to roost," Meili said.

Impact of contract negotiations unclear

Currently, more than 30 of the province's39 public sector unions have expired collective agreements. Harpauer said a one per cent increase in public sector salaries costs government about $75 million.

She said the contingency of $250million from the 2017-18 budget was unique and created in case the government did not reach its goal of a 3.5 per cent wage reduction across the public sector. It did not reach that reduction and the money was spent elsewhere.

Harpauer said the government does not have a built-in contingency set aside for either salary agreements or disasters.