Yukon Liberals' first budget delivers $6.5M surplus, but predicts deficits to come

The new Yukon government has delivered on some of its election promises, but backed off on others, in its first territorial budget. Premier and Finance Minister Sandy Silver introduced his government's spending plans in the legislature this afternoon.

The $1.44 billion dollar budget for 2017/18 is the territory's largest ever, continuing a long trend of budgets that grow annually. Last year's was $1.39 billion.

The Liberals have defied some expectations by projecting a modest surplus this year, of about $6.5 million. But that rosy outlook will turn around starting next year, with deficits expected for the remainder of the Liberal mandate — about $49 million in 2018/19, $58 million in 2019/20 and $42 million in 2020/21.

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The budget also confirms what Silver had said earlier this year — that the previous government turned last year's projected $9.4 million surplus to an $8.2 million deficit, before they were ousted in November's election.

"Coming in to office we understood that Yukon had a surplus budget. Yet, there was no surplus," Silver said in his budget address.

"Because we believe in Yukoners, we will deliver a series of budgets that address their concerns and speak to their hopes for themselves and the territory."

Cigarette taxes up, business taxes down

The Liberals had campaigned on a promise to eliminate the small business tax, but that won't happen this year. Instead, it will be reduced from 3 per cent to 2 per cent.

Silver said his government will then "evaluate the implications of this change before making future decreases."

"While we committed to a zero tax rate, we must ensure that this move is the best one towards achieving our overarching goal of ensuring sound public finances." 

The general corporate tax rate will also be reduced from 15 per cent to 12 per cent, starting in July, as promised.

The only tax that will go up this year is on tobacco — it will go from 21 cents to 25 cents per cigarette in July (or, an extra 80 cents per 20-pack) and then increase again to 30 cents by next April (or, $1.80 more than the current price of a 20-pack).

Government officials expect the tax on smokes to partially offset lost corporate tax revenue of about $2 million this year.

The personal income tax rate will not change this year, but the government is expecting more money from income tax when corporate taxes go down (more money for shareholders means they pay more income tax, the reasoning goes).

Schools, airports, and mental health workers

Some other highlights from the budget:

• About $18 million to be spent on energy retrofits (the Liberal campaign platform promised "up to $30M per year")
• Funding for 11 new full-time addiction and mental wellness workers in eight communities
• $4 million to increase school staffing
• $6.5 million for "restoration and rehabilitation" of airports and airstrips

• $15.3 million for bridge restoration projects (including the Nares River, Nisutlin and Fox Creek bridges)
• $650,000 for four new ambulances
• $1.5 million for the First Nations Housing Program
• Doubling the Regional Economic Development Fund's budget to $800,000
• $8 million this year to develop a new French-language high school 
• $9.8 million to develop new lots in Whistle Bend
• $300,000 for Canada 150 celebrations
• Funding for Yukon College to take in a new class of nursing students every 12 months, instead of 18 months

Financial advisory panel

The government also announced a new panel of experts that will look at Yukon's finances and consult with the public about budgetary planning.

The goal is economic sustainability — in other words, reducing or avoiding the budgetary deficits projected in the coming years.

"Yukon's current path leads to further fiscal uncertainty," Silver told the legislature. "As Yukoners know, the longer you go down a path in the wrong direction, the harder the trip back will be."

"Better to stop, look around, get your bearings, determine the course correction."

Silver said the five-person Financial Advisory Panel, chaired by accountant Norm McIntyre, will be non-partisan. The other members of the panel include economists Tim O'Neill, Ron Kneebone and Trevor Tombe, and Grace Southwick, a director with the Kluane First Nation.

The panel will consult with First Nations, social organizations, municipalities, and others to come up with recommendations by the end of the year. Those recommendations will "inform" future budgets and planning, Silver said.

"We will put Yukon's finances on a sustainable path, together, through open and honest dialogue about our shared future."

'Big deficits, and big debt'

The opposition Yukon Party, however, is not optimistic after reviewing this year's budget, with interim leader Stacey Hassard accusing Silver of sending Yukon "down a path of big deficits, and big debt."

In a statement, Hassard also blasted the government for back-pedalling on its promise to scrap the small business tax this year. He also said the government has failed to factor in the effects of the proposed carbon tax.

"If the carbon tax reduces economic activity, or makes it more expensive for government to heat their buildings or build highways, the deficits and debt projected in this budget could be even higher," Hassard said.

Meanwhile, the NDP applauded the government for investments in the First Nation Housing Program, and addictions and mental health workers, but said the budget doesn't offer enough to Yukoners "struggling to make ends meet."

"Yukoners want a decent minimum wage, protection for tenants and mobile home owners — not corporate tax cuts," MLA Kate White said in a statement.

"There are people working hard out there who just can't catch a break."