PST increase and job cuts real possibilities as Sask. sticks to balanced budget goal

Increased taxes and job cuts are possible strategies to cut Saskatchewan's near-$600 million budget deficit, a University of Regina economist says .

The Saskatchewan Party government will release its first budget under new Premier Scott Moe on Tuesday.

Both Moe and his finance minister have described the task as "tough" and "challenging." The government has committed to balancing the budget by 2019-20.

First-time Finance Minister Donna Harpauer has said she's "confident" the province can slash the $595-million deficit by next year and meet its goal.

University of Regina economist Jason Childs said raising the provincial sales tax to seven per cent while also cutting public sector jobs is one path to slashing the deficit.

"If we are going to take this seriously, there has to be new revenue streams and there has to be additional cuts to spending that's going to mean jobs," Childs said.

"And we've got to look for a new source of revenue be that an increase in PST, be that an increase in income taxes."

Last year, the province raised the PST to six per cent and expanded the scope of what the tax applied to. In 2006, the NDP government lowered the PST from seven to five per cent, a year before a provincial election.

Harpauer recently said everything is on the table when asked about a possible PST hike.

How much the province decides to cut this year is a "political question as much as an economic calculation," said Childs.

"I think they're going to try and cut it in half again. I'm not sure they're going to be able to do it without really starting to cut bone," he said.

​An election looms

The Saskatchewan Party government is in the second year of a three-year plan to balance the budget.

"The deficit target is arbitrary. Why three years? Because there's going to be an election," said Simon Enoch, Saskatchewan director for the Canadian Centre for Policy Alternatives.

"This government seems to think that in order to win the next election they have to be at balance by then, but there's no reason we have to get to balance by then."

Enoch said the commitment could cause more damage than waiting an extra year to balance.

A 'defining moment' for new premier

Enoch said the budget will help form the public perception of Premier Moe, who has been in the role since the end of January.

"I think it's really going to be a defining moment for the premier. I think this budget will really give us a sense of what a Scott Moe budget is all about and what its priorities are," he said.

Enoch said the government's cuts may be harder to see than last year. The previous budget eliminated the provincial bus service and made targeted cuts to libraries and funeral services for low income people, sparking outcry.

"One of the things the government learned is that when you target certain programs it's very easy for the public to become angered. It's easier to sell abstract, nebulous cuts to certain ministries and have them find the cost savings," Enoch said.

Concerns about economy

Doug Elliott has been tracking social, economic, and demographic trends in Saskatchewan for more than 30 years.

He said the Saskatchewan economy is in a "prolonged but shallow slump" but still "way better off than it was five years ago."

Elliott said consumer spending is the only economic indicator he tracks that is trending up.

"It wouldn't take much to tip [the economy] in either direction so that makes what they do important, more important than usual."

Anything that dampens consumer spending could send the economy in the wrong direction, Elliott said.

"Raising taxes or laying people off would probably tip the economy into a recession or a continued recession," he said.

Trump factor a budget wildcard

With the United States being Saskatchewan's number 1 export destination, President Donald Trump's decisions on NAFTA and ongoing trade issues with China have major implications for the province.

"This whole thing can turn on a dime. Let's say Trump renews NAFTA but continues to squabble with the Chinese. That's absolutely wonderful for us, because American products are locked out of the Chinese market through tariff barriers, ours aren't so that's going to spike our demand," Childs said.

On the other hand, the end of NAFTA would have "massive" implications.

"Losing NAFTA would be a huge blow to the economy of the entire country," Childs said.