Yukon budgets since the 2016 election often seemed printed from the same template: record transfer payments, record spending, the budget speech as a list of projects for every political constituency, and proclamations of fiscal responsibility matched by the steady dwindling of net financial assets into a growing territorial debt.
Last year, I described it as a “pedal to the metal” fiscal policy. When the economy was slow, that year’s budget would stimulate the economy. When the economy was hot with inflation, the budget would also stimulate the economy.
This year, the budget speech itself sticks to the old template. Finance Minister Sandy Silver even said, “Now is not the time to take our foot off the gas.” The speech didn’t mention the word “debt.”
But if you look under the hood at the numbers, something is different. There is plenty of evidence of the needle dropping back on the RPM dial of the territorial spending engine.
Spending will go up only 4.4 million next year, to $1.927 billion. That’s a rise of just 0.2 per cent, despite revenues growing 6.3 per cent. Last year, spending went up 11.1 per cent on a revenue increase of just 4.8 per cent.
Think about that 0.2 per cent number for a second. It means that spending per Yukoner in inflation-adjusted terms will actually go down 4 per cent, assuming inflation is around 2 per cent and population growth is also around 2 per cent.
In some European countries, they would call that “austerity.” It’s not as severe as in the Northwest Territories, where the new fiscal plan actually sees spending go down in absolute terms next fiscal year. But asking Yukon departments to get by on 0.2 per cent more money will be a challenge.
Capital appropriations will be up just $16,000, a rounding error on a $484 million pot of money.
Another new thing is the Fiscal Summary in the Fiscal and Economic Outlook. It now very helpfully shows citizens four years of future plans, not just two years like the last budget.
This summary shows expenses before contingencies and accounting adjustments rising just 2.4 per cent per year on average through 2028—29. Again, this is less than expected inflation plus population growth. This implies four years of more budgetary rigour than most Yukon government program managers have been used to.
Over the last two weeks, this column looked at the territorial debts of the Yukon and N.W.T. Our neighbouring territory’s debt has been rising rapidly and is fast approaching its federal limit. The Yukon still has significant borrowing capacity before it hits its federal limit, but this “headroom” has been shrinking steadily. Looking just at the core Yukon government, excluding its government-owned corporations, net debt was $259 million on March 31, 2023. This is expected to rise to $445 million by March 31 of this year.
That suggests a cash burn of $186 million this fiscal year. It would not take too many more years like that to get us into an N.W.T.-style situation with a looming federal debt limit.
However, the new four-year projections also show the debt peaking at $521 million in 2026-27. After that, the plan is to actually pay back $146 million in the two following years.
The story these numbers tell is of the Yukon government embarking on a new period of spending discipline, managing the territorial debt to stay out of the perilous waters that N.W.T. has found itself in.
After almost a decade of higher spending growth, this will take some getting used to by government program managers, local contractors and local advocacy groups.
There is also a possibility that I am reading too much into the new budget’s numbers. Few still pretend that a Yukon government spring budget is the plan for the year. Everyone knows there will be a supplemental budget in the fall with additional spending, sometimes considerable. In the original 2023-24 budget, the net debt at the end of the year was only supposed to be $375 million. It ended up $70 million higher.
We are also getting closer to campaign season for the next territorial election, which must be held by November 2025. Few governments like to go into an election after holding spending flat despite inflation and population growth.
The story behind the 2024 budget speech is that the Yukon government has charted a course to avoid the debt problems and cuts on the agenda in Yellowknife. Whether they can stick to this course over the next 18 months is the thing to watch.
Keith Halliday is a Yukon economist and the winner of the 2022 Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.