Premier Fentie brought down his latest budget on March 20th, the day before Yukoners (and more importantly, journalists) went on their Easter breaks.
Traditionally Easter marks the end of Lent, a 40-day period of fasting and abstinence. The premier’s budget, however, reverses this ritual.
For some the fasting begins now. And it will last more than 40 days.
This budget was relatively low key. The government had few major initiatives to announce. The real meaning was deeper in the details.
Total spending will actually go down this year by one per cent, unless there is a flurry of mid-year announcements. This is a big change, considering that spending has gone up more than $200 million since 2004/05.
Even achieving just a one per cent cut will require dipping into the Yukon’s $130-million cash surplus to the amount of $22 million this fiscal year. Under the government’s old accounting system, this would have been called a deficit.
Cabinet ministers did not share the pain equally. They made some choices about priority and non-priority departments. For example:
Winners: Executive Council Office (up 10 per cent), Finance (up four per cent), MLA salaries (we’re not sure exactly how much, but the Legislative Assembly budget is up 87 per cent since 2006/07)
Losers: Ombudsman (down seven per cent), Women’s Directorate (down nine per cent), Tourism and Culture (down six per cent) and Public Schools (down three per cent including capital)
Our reliance on Ottawa has also grown. The percentage of revenue that the Yukon government generates itself has fallen to 11 per cent.
It is of course wonderful when the money plane arrives from Ottawa. You see the federal Challenger at the airport and you get the lovely feeling that, somewhere in the Yukon, a bemused federal minister is standing in front of the cameras with a giant fake cheque with a large number on it.
Being a Yukon cabinet minister and getting to share the photo-op is undoubtedly a lot of fun.
But we might be seeing a bit less of the money plane. This year, federal transfers to the Yukon actually went down. The figure was only $2.4 million, but if it keeps happening then you can expect an economic chill to go up the spine of every contractor, small business owner and government job seeker.
They’ll all be standing at the airport, looking eastward for contrails like those Pacific Islanders who couldn’t figure out where the US Air Force had disappeared to in 1945.
This year’s reduction was due to the winding down of various special federal programs. A new one, called Building Canada will replace some of the money. The main formula financing deal kept delivering like it has for decades.
However, in the longer run there are some risks. Our formula is driven by economic conditions and government spending in Southern Canada. If the global credit crunch, economic turbulence and stock market ructions cause a global recession, our formula will reflect it.
So what should we do? The last few years have been very fortunate for the Yukon. Federal transfers and a global boom in mineral prices have been perfect flying weather for us. The next few years might be more turbulent.
Some places like Norway, Alaska and Alberta have set up rainy-day funds in case their luck changes. Their luck comes from oil and ours from Ottawa, but the principle is the same.
Former premier Pat Duncan set up a rainy day fund near the end of her tenure. She hoped to put aside some of the Yukon’s money and save it for future hard times.
Premier Fentie dismantled the fund immediately and has been spending the money.
But now, by mistake, he has copied Pat Duncan. By getting $36 million of Yukon money frozen in commercial paper and not available to spend for up to eight years, he has effectively recreated the Duncan rainy-day fund on an even larger scale.
Keith Halliday is a Yukon economist and author of Aurore of the Yukon and Yukon Secret Agents.