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Finance Minister Kevin Doherty released the province’s year-end financial results today, with a clean audit opinion from the Provincial Auditor. The deficit is entirely due to the huge decline in resource revenue, which was down $853 million from the previous year (2014-15) and down $692 million from the 2015-16 budget forecast.
“Saskatchewan lost nearly one-third of our resource revenues compared to the previous year,” Doherty said. “In spite of this huge drop, we are managing through this challenging period. We will continue to work toward returning the province to balance in 2017-18.”
The 2015-16 deficit, excluding the pension adjustment, is $248 million higher than the $427 million projected at third quarter. The resource sector continued to face challenges in the fourth quarter, taxation revenue was lower than expected and the province didn’t receive federal assistance for wildfire costs in 2015-16 as expected.
The $675 million deficit when combined with the 2015-16 pension adjustment of $845 million results in a $1.52 billion total deficit. As noted when the 2015-16 budget was delivered, the pension adjustment is highly volatile and for this reason is not included in surplus or deficit calculations at budget time or for the province’s quarterly budget forecasts.
“As we explained at budget time, the pension adjustment fluctuates by hundreds of millions of dollars from year to year,” Doherty said. “It is effectively an accounting adjustment which represents how much it would cost the government if it had to pay out all pension costs owing immediately. Of course, these pensions are not paid out all at once – they are paid out over a long time period, so it wouldn’t make sense to make budget decisions based on an accounting adjustment that fluctuates so much from one year to the next.”
Total revenue in 2015-16 was $13.63 billion, $792 million less than projected at budget. Oil revenue was about $347.5 million less than budgeted and down nearly $724 million compared to 2014-15. Potash revenue was $552.1 million, about $244 million less than budgeted.
Total expense (excluding the pension adjustment) was $14.31 billion, $112 million higher than the budget. Total expense includes increased expense related to last year’s wildfires in the north, disaster assistance payments for prior years and pressures in health and social services.
“Returning the province to balance by 2017-18 will not be easy,” Doherty said. “It will require transformational change and a close look at everything government delivers. These results and the volatility of the non-renewable resource sector only serve to further our resolve to change and make the difficult decisions that will lead to greater sustainability.”