Yukonomist: The squirrel, the husky and the rope

The squirrel is political popularity.

Picture a husky tied with a rope in the backyard when a squirrel makes a dash for a spruce cone on the lawn.

You know how it almost always ends: a squirrel with heart palpitations, and a husky with a sore neck.

The rope is usually unfazed.

Today, let’s have the squirrel be political popularity. The husky is the Yukon government. And the rope is the borrowing limit imposed on the Yukon government by the feds.

I haven’t written very often on our federal borrowing limit. For the last decade and more, the Yukon had lots of cash in the bank. If the federal borrowing limit came up when Yukon fiscal policy cognoscenti gathered, it was usually just to exchange jokes at the expense of the N.W.T. or Nunavut if those territories looked like they were going to hit their limits.

“The other territories get so much cash from Ottawa,” Yukon economists would snigger, “and they still can’t manage to stay out of debt!”

Well, the Yukon’s rainy day fund has now been spent. You can expect to hear more about our debt limit in the future.

In the last few weeks, the Yukon’s Fall supplemental budget came out as well as the final accounting for the last fiscal year (called the 2018-19 Public Accounts if you want to look them up).

The Yukon government husky was already chasing the popularity squirrel. The husky was stimulated by over a billion dollars of caffeine from Ottawa in the Spring budget, which also included an extra cash deficit of $47 million to buy the husky a few more Monster Energy drinks.

In last month’s supplemental budget, the cash deficit was increased by another $21 million to a total of $68 million. This means injecting more fiscal stimulus into a local economy already straining its limits. Unemployment is historically low and housing demand outpaces supply. Maybe just one more can of Redbull and the husky will catch that squirrel.

The government said the higher cash deficit was primarily because of unexpectedly high costs fighting forest fires. I suppose this means that none of the other 20 departments had projects that came in significantly below budget, and that the government decided not to reduce any other budgets to make up for the unexpected expense.

The extra spending also means borrowing another $21 million.

Which brings the rope back into the story. Our federal borrowing limit is $400 million. It applies to the entire Yukon government apparatus, including Yukon Development Corporation (owner of Yukon Energy), the hospital, Yukon College and Yukon Housing. Government agencies often borrow to build things like dams, new buildings or housing, so even back in 2017 when the rainy day fund still existed the Yukon government was responsible for debt outstanding from such previous projects.

At the end of fiscal 2017, total debt was $194 million and we had $206 million of remaining borrowing capacity before hitting our limit of $400 million.

Now that the rainy day fund is gone, however, every extra can of Redbull the husky guzzles has to be paid for with borrowed money. At the start of this fiscal year on March 31, our debt was up to $209 million with borrowing headroom down to $191 million.

The cash burn planned for this fiscal year will use up about a third of our remaining headroom. It won’t be exactly that much. There are accounting technicalities, and one government corporation or another may also borrow more or pay back old debt.

But, in the big picture, the husky is running out of rope.

Debt isn’t automatically bad. It can be used to stimulate the economy, although as noted above the economy doesn’t need stimulating these days. It can also be used to pay for big long-term infrastructure to be enjoyed by future generations. However, you aren’t seeing any big renewable energy projects being built by the government today. The energy portion of the capital budget this year is $14 million, a small sum compared to the scale of our energy needs. And the Public Accounts show Yukon Housing actually paid back debt in the last fiscal year rather than borrowing to build more housing.

What does all this mean for Yukoners?

For banks, investors, First Nations investment funds, lawyers and consultants, it means the Yukon government will probably be getting more interested in public private partnerships (PPPs). These include projects where public infrastructure is partially or wholly financed by investors instead of the government capital budget picking up the whole tab. The N.W.T.’s Stanton Hospital project was a PPP and so was Nunavut’s Iqaluit airport upgrade. Both projects helped those territorial governments manage their debt limits.

For younger Yukoners, it means that the Yukon government will need to save part of its transfer payments in future years to pay back loans taken out today. We’re already leaving you the multi-century Faro mine clean-up project and a warming planet, so why not some debt too?

Of course, the Yukon government may convince the feds to lengthen the husky’s rope by increasing our debt limit. In that case, the borrowing and spending can happily go on for years.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Children’s performer Claire Ness poses for a photo for the upcoming annual Pivot Festival. “Claire Ness Morning” will be a kid-friendly performance streamed on the morning of Jan. 30. (Photo courtesy Erik Pinkerton Photography)
Pivot Festival provides ‘delight and light’ to a pandemic January

The festival runs Jan. 20 to 30 with virtual and physically distant events

The Boulevard of Hope was launched by the Yukon T1D Support Network and will be lit up throughout January. It is aimed at raising awareness about Yukoners living with Type 1 diabetes. (Stephanie Waddell/Yukon News)
Boulevard of Hope sheds light on Type 1 diabetes

Organizers hope to make it an annual event

City of Whitehorse city council meeting in Whitehorse on Oct. 5, 2020. An updated council procedures bylaw was proposed at Whitehorse city council’s Jan. 18 meeting that would see a few changes to council meetings and how council handles certain matters like civil emergencies. (Crystal Schick/Yukon News file)
Whitehorse procedures bylaw comes forward

New measures proposed for how council could deal with emergencies

A Yukon survey querying transportation between communities has already seen hundreds of participants and is the latest review highlighting the territory’s gap in accessibility. (Crystal Schick/Yukon News file)
Multiple reports, survey decry lack of transportation between Yukon communities

A Community Travel survey is the latest in a slew of initiatives pointing to poor accessibility

Mobile vaccine team Team Balto practises vaccine clinic set-up and teardown at Vanier Catholic Secondary School. Mobile vaccine teams are heading out this week to the communities in order to begin Moderna vaccinations. (Haley Ritchie/Yukon News)
Mobile vaccine teams begin community vaccinations

“It’s an all-of-government approach”

A file photo of grizzly bear along the highway outside Dawson City. Yukon conservation officers euthanized a grizzly bear Jan. 15 that was originally sighted near Braeburn. (Alistair Maitland/Yukon News file)
Male grizzly euthanized near Braeburn

Yukon conservation officers have euthanized a grizzly bear that was originally sighted… Continue reading

Mayor Dan Curtis listens to a councillor on the phone during a city council meeting in Whitehorse on April 14, 2020. Curtis announced Jan. 14 that he intends to seek nomination to be the Yukon Liberal candidate for Whitehorse Centre in the 2021 territorial election. (Crystal Schick/Yukon News)
Whitehorse mayor seeking nomination for territorial election

Whitehorse mayor Dan Curtis is preparing for a run in the upcoming… Continue reading

Gerard Redinger was charged under the <em>Civil Emergency Measures Act</em> with failing to self-isolate and failing to transit through the Yukon in under 24 hours. (Joel Krahn/Yukon News file)
Man ticketed $1,150 at Wolf Creek campground for failing to self-isolate

Gerard Redinger signed a 24-hour transit declaration, ticketed 13 days later

Yukon Energy, Solvest Inc. and Chu Níikwän Development Corporation are calling on the city for a meeting to look at possibilities for separate tax rates or incentives for renewable energy projects. (Crystal Schick/Yukon News file)
Tax changes sought for Whitehorse energy projects

Delegates call for separate property tax category for renewable energy projects

Yukon University has added seven members to its board of governors in recent months. (Crystal Schick/Yukon News file)
New members named to Yukon U’s board of governors

Required number of board members now up to 17

Yukonomist Keith Halliday
Yukonomist: Your Northern regulatory adventure awaits!

“Your Northern adventure awaits!” blared the headline on a recent YESAB assessment… Continue reading

Yukoner Shirley Chua-Tan is taking on the role of vice-chair of the social inclusion working group with the Canadian Academy of Health Sciences’ oversight panel and working groups for the autism assessment. (Submitted)
Canadian Academy of Health Sciences names Yukoner to panel

Shirley Chua-Tan is well-known for a number of roles she plays in… Continue reading

Most Read