Yukon headed for the red

The Yukon will post deficits over the next two fiscal years, predicts the Conference Board of Canada.

The Yukon will post deficits over the next two fiscal years, predicts the Conference Board of Canada.

In a report released last week that examines the economies of Canada’s territories, the board concludes that the Yukon will run into the red by 2010-11 and 2011-12.

This is at odds with the territory’s own fiscal forecasts, which project annual surpluses of about $600,000.

“That’s because we have different assumptions on the demographics that are going to drive health care and education,” said Sabrina Browarski, one of the report’s authors.

It’s rising health-care costs, in particular, that concern the board. As Yukon’s population ages over the next decade, health costs are predicted to rise annually by 4.8 per cent. By 2020, health costs will have grown by 172 per cent. “So near doubling,” said Browarski.

New mines are expected to be a boon to the economy over the next decade.

It begins this year, with the expected opening of Yukon Zinc’s Wolverine mine near Ross River. Wolverine is expected to produce 1,700 tonnes of raw ore per day.

That will push up Yukon’s metal mining output by more than one-third and help bring up the territory’s total growth, as measured by gross domestic product, by four per cent.

But mining-driven growth will be outweighed by runaway health-care costs, so that by 2020, the board expects the territory will be more dependent than it is now on cash transfers from Ottawa.

By then, transfer money is expected to make up three-quarters of Yukon’s total spending, up from 71 per cent now.

“Once you have people pushed into the older age cohorts, they tend to be very costly in terms of public services to support them,” said Browarski. “You start incurring substantially higher costs.”

And mining’s improvement to the Yukon’s bottom line will be mitigated by an expected reliance on an imported labour force.

Out-of-territory workers will likely be needed to fill a labour shortage once the mining boom picks up. But these Outside workers will likely file their income taxes from their home jurisdictions, causing mining money to leak out of the territory.

It’s entirely possible that the Yukon Finance Department knew something that the conference board didn’t when it came up with its own estimates, which are based on data from Statistics Canada and the federal and territorial finance departments, said Browarski. “Perhaps the department has different information they can’t disclose,” she said.

The Health Department is aware that runaway costs are a problem. Health costs have doubled in the past decade, from $70 to $150 million, according to Taking the Pulse, a government report released in July 2009.

And unless health-related spending is somehow curbed, within eight years the territory expects to face a quarter-billion-dollar gap between its needs and means in health funding.

But it remains unclear what the government plans to do about curbing health costs. One thing it won’t do is re-introduce health premiums, Health Minister Glenn Hart has declared.

Other than this, little has been explained about the territory’s strategy to tamp down health costs, besides talking with pharmacies about the markups paid on drugs, which are called “outrageous” in Taking the Pulse.

Contact John Thompson at johnt@yukon-news.com.

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