After predicting a surplus, Sask. now forecasts a $251M deficit

Sask. out of the black, into the red WATCH: Wayne Mantyka reports on the massive shift in Saskatchewan’s economic forecast from a $1B surplus to a $250M deficit.

After predicting a surplus of $736 million, the Saskatchewan government is now forecasting a deficit of $250.5 million in its mid-year financial report released on Monday.

The report cites reduced potash sales and severe drought as main reasons for the plunge.

In a news release, the province said global market conditions impacted potash prices and sales.

At the same time, crop insurance claims escalated due to severe drought conditions experienced in parts of Saskatchewan last summer.

The deficit comes after a substantial surplus of $1.3 billion was predicted in March. The surplus was later downgraded to $736.1 million in the province's first-quarter update.

The Saskatchewan government also said it's spending more money than anticipated, with its expense forecast increasing seven percent or $1.3 billion from budget time.

However, a sliver of the spending was offset by a jump in revenue, up $35.2 million or 0.2 per cent from budget day.

According to the province, the new money coming in largely stemmed from tax revenue, including provincial sales tax and corporate income tax.

"The drought was unforeseen, reducing projected crop production by 20 per cent in 2023, when compared to 2022," finance minister Donna Harpauer said in the release.

"Potash prices and sales dropped because potash from Russia and Belarus flowed to large markets including China and India despite being subject to Western sanctions in response to Russia's invasion of Ukraine," Harpauer said.

Harpauer said despite the change, Saskatchewan’s finances are "solid, thanks to a resilient economy and more people than ever living and working in Saskatchewan.”

TAX CUTS 'CURRENTLY NOT LIKELY'

With inflationary pressures being felt in Saskatchewan, Harpauer was asked if the most recent forecast means that no tax breaks will be coming for residents.

Harpauer said currently the answer is likely no.

“Looking at it right now and our position right now if that follows through into the budget I would say it’s not likely that we could do any tax cuts in this budget,” she said.

However, Harpauer said the province is still in very early budget deliberations – adding they need to see the direction the economy goes before a final decision is made on that front.

Harpauer then reiterated that Saskatchewan continues to be one of Canada’s most affordable places to live.

“Of the provinces that have PST we have the lowest PST in the country so we have made cuts that we continue to bring along with us each year,” she said.

“We are aware that affordability is an issue, the cost of fuel, the cost of food has gone up and we’ll continue to pressure the federal government to discontinue the carbon tax which we think is a large driver of inflationary costs,” she added.

Several provinces have made the decision to cut their provincial gas tax to help relieve cost of living pressures, including Alberta, Manitoba and Ontario.

MISSED OPPORTUNITY: NDP

The opposition NDP says the province has failed to take advantage of an economic boom and squandered its surplus on endeavours such as the province’s near $1 million trip to Dubai.

"Instead of growing the economy, they've become more and more dependent on hiking taxes and costs on the people of Saskatchewan during an affordability crisis," NDP Leader Carla Beck said in a release.

"We're all paying more to cover the cost of their mismanagement," Beck added.

According to the NDP, since 2015-16, the Sask. Party has only reported a single balanced budget.

-- With files from Josh Lynn and Wayne Mantyka.