It’s good to have money in the bank. According to a recent study by one of the big banks, only one-third of Canadians have enough cash on hand to cover three months of expenses in case of bad news.
The Yukon traditionally has also had a sizeable reserve of its own. As recently as March 31, 2009, the Yukon had $135 million stuffed into the territorial sock. That’s around $4000 per Yukoner, a big cushion considering that most provinces have big debts.
It’s mostly gone now. The fun is over after a flurry of government spending. The “net financial resources” of the Yukon government are expected to be down around $33 million next March, which is not far from the amount of cash the Yukon has frozen in the asset-backed commercial paper debacle.
This doesn’t mean that the Yukon government is going to be bouncing cheques any time soon. There is still plenty of cash coming in. It just means we don’t have a big chunk of cash in the bank for contingencies or big projects (or for politicians to buy our votes with, as some might say).
If we do actually have a rainy day, the government still has options. It just got a credit rating from Standard & Poor’s, presumably so it is ready to borrow money when it wants to. The Yukon government also has a relatively large capital budget, almost $300 million this year. It will be easy for a future cash-strapped cabinet to defer a school or some paving to free up some ready cash if they need it for the short term.
But what we all have to recognize is that there won’t be quite as much easy government money around for the next few years. There will still be government jobs and high-profile projects. There will just be more competition for them. Deputy ministers won’t be able to hire quite as many policy analysts. Government departments won’t be hiring quite as many contractors. And citizens’ groups won’t be getting as many sports facility upgrades and cultural event subsidies.
We should remember this when the next election campaign rolls around. Big spending promises from any party will have to be taken with a larger grain of salt than usual.
The Yukon Party politicians will have to face even tougher questions from voters, since they are the ones that spent the money. Was it wisely spent? Is spending going to be cut, or will we now follow the provinces into debt?
Instead of telling us their plans, however, Yukon Party ministers in the recent legislative assembly debates have been making some outlandish claims about their economic record. It’s their view, apparently, that Yukon Party fiscal management is the cause of the Yukon’s recent boom years.
The real causes are surging transfer payments from Ottawa and the rise of China. This year we expect $892 million from Ottawa in transfers and recoveries, about 83 per cent of Yukon government revenue. In 2004/05, after devolution, we got about $565 million. It’s hard not to be popular when you happen to be the pilot of the helicopter dropping an extra $327 million on 34,000 Yukoners.
As for the rise of China (and India, Brazil and the rest of the rapidly developing economies), this has had a huge impact on commodity prices. Which, of course, has had a huge impact on exploration and development in the Yukon. Grade A Copper on the London Metal Exchange, for example, was less than US$2000 per tonne before 2003. Now it is over US$8000. Gold is at record highs, over US$1300 per ounce. These prices obviously have a huge effect on the level of mining activity in the Yukon.
So if you want to vote for the premier most responsible for the Yukon’s boom you should probably cast your ballot for Premier Deng Xiaoping, the architect of China’s economic reforms. Don’t be deterred by the fact that he’s not even on the ballot (and dead to boot). Just write him in Alaska-style under the other candidates.
Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.