2018 Yukon budget projects deficit, but not as large as expected

For the first time in years, the Yukon government is expecting to spend more than it receives this year, with a projected budget deficit of $4.54 million.

That follows years of surpluses, but it wasn't unexpected — Premier Sandy Silver's Liberal government had warned as early as last year that future budgets would swing into the red. What's new is that the deficit is relatively modest, compared to earlier predictions.

"This is, in part, because of the fiscal approach our government is taking to fully account for costs," Silver said in the Legislative Assembly on Thursday, as he delivered his government's second budget.

• ANALYSIS Deficit Days: What you need to know about Yukon budget 2018

A year ago, the government predicted a budget deficit of nearly $49 million this year, followed by more deficits for the foreseeable future. Now, it's expecting to be back in the black by 2020/21 — just in time for the next territorial election.

Silver credits better long-term planning when it comes to capital spending, and stronger growth than was anticipated a year ago.

"Increased activity in mining and tourism, coupled with continued strength across most sectors and an improved outlook for global growth, are all contributing to a more promising outlook for our economy," Silver said.

Road work, housing, track and field

The $1.47 billion budget includes no new taxes, and a capital budget this year of about $280 million, a little more than what was spent last year on new infrastructure in the territory.

Some of the big projects outlined this year include:

• $42 million in municipal and First Nation infrastructure
• $65 million in transportation infrastructure, including road work, bridge replacement and repair, and redesigning the Dawson City airport runway 
• $39.7 million for housing and new building lots, including $6 million for affordable housing and $15 million on new Whistle Bend subdivision lots 
• $18.7 million for the Whistle Bend continuing care facility
• $6.8 million for a new track and field facility at F.H. Collins school
• $3 million for a new French language high school in Whitehorse
• $1.2 million for the Old Crow multiplex

This year's budget also includes a five-year capital plan, something the Liberals promised when they came to power but did not deliver until now.

It outlines spending plans and priority projects for the coming years and is intended to help with planning and tendering. According to the government, the longer-term plan also makes budget predictions more accurate — for example, it's part of the reason this year's deficit is smaller than was expected.

According to the new five year plan, Yukon's capital spending will go up slightly in the next two years — to an anticipated $293 million in 2020 — before dropping off again in 2021 and 2022.

The plan is described as "flexible" though, and "will evolve over time." It's expected to be updated every year to coincide with the tabling of the budget.

$1B from Ottawa

This year's $1.47 billion budget continues a trend of steady annual growth (last year's was $1.44 billion), with the bulk of government revenues coming directly from Ottawa. This year, transfers and grants from Ottawa to Yukon will slightly top $1 billion.

As usual, the bulk of the territorial budget will go toward basic operations and maintenance costs for the government, including nearly $545 million to cover government salaries.

The biggest increase is in the department of Health and Social Services, primarily to cover the costs of operating and staffing the new Whistle Bend continuing care facility, when it opens later this year — $24 million — plus operating costs for 10 new beds at the Thomson Centre ($2.3 million).

The education budget is also going up, primarily to cover the costs of new teachers and educational assistants ($6 million), and the environment department will spend an additional $4.6 million to clean up the Marwell Tar Pit contaminated site in Whitehorse.

The budget does not factor in any impact from carbon pricing. The Yukon government says the federal plan is not yet clear enough to determine what it will mean for Yukon.

The budget does include expected revenue from cannabis sales, though, based on the revenue-sharing agreement between Ottawa and the provinces. Yukon expects about $400,000 this year in pot revenue. 

That will be outstripped by the initial expenses associated with legal pot, though — the government will provide $3 million in start-up funding to the Yukon Liquor Corporation for cannabis distribution, and will spend another $642,000 to draft new regulations and launch an awareness campaign about pot use.

'Really concerning,' says opposition

Opposition leader Stacey Hassard was quick to jump on the costs associated with legal marijuana. He said the territorial government made a bad decision in making pot distribution a government responsibility.

"Here was an opportunity for the private sector to come in on day one, the government could set the rules up, we would have known how things were going to go," he said.

"Instead, they've chosen to do the opposite and to grow government — and I think that's really concerning for Yukoners."

Hassard also said he was disappointed to see the government projecting deficits in the coming years, but had mild praise for the five-year capital plan.

"It's hard to argue with something like that, it's good for people to know what's going on in the future. But I didn't see as many numbers as I had hoped."

NDP leader Liz Hanson had more withering criticism, calling it a "sit back and relax" budget.

"There's no sense of a vision being articulated here," she said.

Hanson said the government doesn't appear to have drawn much from the work of the Financial Advisory Panel, which Silver appointed last year to come up with options to keep the territory in good financial health. She said the government has gone with the "do-nothing option." 

She wanted to see more investment in child care, home care for seniors, and energy retrofits.  

"There's no mention of climate change, for goodness sake," she said.