Thanks Ottawa (again)

Now that Scotiabank Hockey Day in Canada is over, we can turn our minds to less important things: like the billion-dollar territorial budget that puts food on the table for most Yukon families in one way or another.

Now that Scotiabank Hockey Day in Canada is over, we can turn our minds to less important things: like the billion-dollar territorial budget that puts food on the table for most Yukon families in one way or another.

The latest Yukon budget came down on February 3, and the usual palaver ensued. Premier Dennis Fentie said the phrase “prudent fiscal management” as often as he could, and the opposition pointed to the deficit.

What really happened?

First of all, the premier predicted a balanced budget for 2011-12. He said the same thing last year, and it turned into a $20-million deficit. But a surplus is again the apparent plan, on both an accrual and a cash basis.

How did he do it? The premier could have saved the Hansard folks the trouble of typing his lengthy speech if he had said something like “Ottawa gave us an extra $55 million in transfer payments, and we iced the $50-million FH Collins school project until after the next election.”

Adding Ottawa’s largesse and postponing FH Collins gives you a swing into the black of around $75 to 100 million, depending on how much of the new FH they were planning to construct next summer. And all the premier had to do was wait for the cheque from Ottawa, and yank the leash of his hapless Minister of Education (who had been telling us all as recently as last fall about his commitment to doing the FH project in 2011-12).

In the bigger picture, the government has been trying for years to claim credit for revitalizing the Yukon economy. I think global commodity prices have had a much bigger impact, as evidenced by the simultaneous mining booms in Alaska, BC and NWT. What can’t be denied, however, is that even after some very good years in the Yukon resource sector our territorial government still generates only 11 per cent of its revenues from its own taxes and fees.

In 2011-12, the government expects so-called “own revenues” to go up $11 million from this year. Sounds good, until you remember that our transfer payment from Ottawa is expected to go up $55 million.

The total revenues expected next year from Yukon oil-and-gas revenue and land-and-mineral leases and royalties will be just $302,000. That’s less than YTG will bring in from campground permits.

With our own revenues from personal and corporate taxes as well as fuel and other taxes going up just $11 million, one wonders if the Yukon government should be spending less time taking credit for the global commodities boom and more time figuring out how to capture more of the benefits for the Yukon. The NWT, for example, introduced a payroll tax in 1993 to ensure that non-resident workers who benefit from NWT resource extraction also contribute to local roads, hospitals and schools.

Despite all this, it is a good thing that the Yukon government plans to have a surplus and rebuild the rainy-day fund that has been raided so liberally in recent years.

However, just like last year’s predicted surplus turned into an actual deficit, we should question the credibility of the premier’s forecasts. He predicts a cut in gross operations and maintenance (O&M) expenditures of about one per cent. This will be tough to achieve in a government used to an average O&M increase of six to eight per cent per year over the last decade. In his original budget last spring, the premier forecast O&M to be $813 million for the current fiscal year, and after cost increases it will likely come in at $862 million by the end of the year.

A miss of roughly $50 million, with surging health and social services costs a major culprit.

A slippage of $50 million this year would put the Yukon back in the red.

Perhaps the most important outcome of all this, at least for the Yukon Party, is that it can now trumpet the phrase “balanced budget.” At least for now.

It may turn out differently by the end of the fiscal year. But by the time we find out in March 2012, the election will have already happened.

Keith Halliday is a Yukon economist and author of Game on Yukon: The Mystery of the Dawson City Nuggets and the 1905 Stanley Cup and other historical adventure novels for young readers.

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