Moe money, more problems
An introductory post in a series on Saskatchewan provincial finances
In late 2022, the Premier of Saskatchewan, Scott Moe, announced that the provincial government would be sending out $500 to every person over the age of 18 in Saskatchewan. The expenditure, cheekily called "Moe money" by some (maybe just me?), was noted as serving both the purpose of alleviating some of the pain caused by heightened inflation across Canada and a recognition that finances in the province were healthy enough to warrant a return of some money collected through taxation that the government didn't intend to spend. Some in the province were excited to get a few extra bucks while others are critical of the move as wasteful.
Fast forward to the 2023 Saskatchewan Provincial Budget, and the Provincial Government has projected surplus of about $1 billion for the fiscal year. However, this time it seems that neither reducing taxes nor returning some of the tax money paid into this surplus to provincial citizens are on the table. Instead, the Province has stated that it intends to use this money to pay down debt.
Let’s use this as a starting point to dive into the topic of provincial debt. I'm going to set this up as the first installation one of a yet to-be-determined series of articles on provincial finances I'll call Moe Money, More Problems. Let’s go!
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The first thing that anyone needs to know about Saskatchewan as background information when talking about debt is that the 1980s and 1990s were bad. When I say that the financial situation was bad for the province, what I mean is that the province was on the verge of bankruptcy bad. Without a quiet bail out package from the Federal government at the time, Saskatchewan would likely have defaulted on payments of its then $15 Billion debt — something that has never occurred in Canada before. The situation surrounding this point in time is complex, confusing, and underlies nearly all conversations of fiscal management and politics.
For today, I’m going to focus on debt. While I’ve already established that the province has a bit of baggage around debt, I think it’s important to take a more neutral view of it and explore the history of debt in the province, where we are today, and put this in the context of other Canadian jurisdictions. In the chart below, sourced from Statistics Canada, we have a trend of Saskatchewan’s debt net of financial assets, or net debt. Net debt is the sum of liabilities minus any financial assets can easily be converted to cash or cash equivalents. In the most recent year available, 2021, Saskatchewan’s net debt was $12.7 billion, which is just under $11,000 for every child, adult, and senior citizen of the province or just over $41,000 per family as defined by Statistics Canada.
Starting from a baseline of next to zero in the late 1970s, debt in the province grew substantially through the 1980s, peaking at $10.6 billion in 1995. After several years of quite harsh austerity through the 1990s and early 2000s, combined with improving resource revenue, the debt level in Saskatchewan dropped to just $2.6 billion in 2008. It’s roughly from this point onwards that debt in the province has again been on a rocket ride all the way up to $12.7 billion where we sit today.
(Side note: another data source available from the federal government department of finance has the 2021 net debt value for Saskatchewan at $15.5 billion, but I didn’t use this source because it only went back to 1990 and while it mostly correlates with the data available from Statistics Canada, there is quite a divergence between the two sources in the most recent couple years. I suspect that this difference will get worked out over the next year or two of reporting, but I find it strange that two Federal Government agencies have such different values that I find myself need to choose which agency I believe is more trustworthy).
Ultimately, I imagine the reader will be interested to learn something about whether debt in Saskatchewan is a problem or not? I’m afraid I won’t have a clear answer, but I do have one additional chart that provides some evidence towards an answer. By comparing provincial debt to provincial GDP (source), we can compare Canada’s ten provinces to see how each are positioned. In the chart below, the first thing that is clear to me is that there are two groups of provinces that can be described by their history of debt-to-GDP. Alberta, British Columbia, and Saskatchewan have avoided substantial growth in this measure for the past 30 years, ending the period at just under 20% debt to GDP. The remaining 7 Canadian provinces have all experienced a nearly linear trend in the growth of their debts even as GDP has grown over this period. These provinces are in the range of 35% to 45% debt-to-GDP.
Furthermore, I notice looking at this chart that even for provinces that are quite high in debt-to-GDP ratio compared to their Canadian peers, they are nowhere near the high rates seen internationally. For example, the United Kingdom currently boast a rate of about 85% and the United States to our south is at about 123%. Canada, as a country, hovers around 70% debt-to-GDP.
While I’m certain that these two factors don’t tell the whole story, they lead me to believe that government debt is not a major issue in Saskatchewan. However, should that trend of increasing debt continue, it could spell tough times ahead for the province. There few people that can agree on the cause of the fiscal problems Saskatchewan encountered during the 1980s or the strict austerity solution that was chosen, yet it’s likely that few people that would want to see a return to the levels of debt that lead us there.
If you subscribed to this distribution list looking for some interesting maps and data analysis, as I suspect many readers have, don’t worry, I’ll post some interesting maps using open data before I go further down the provincial finances rabbit hole. That said, here are a few of the topics that I’m exploring for the next instalments of the Moe money, more problems series to come:
Hot or not - Provincial credit ratings
Default settings - Federal bailout of Saskatchewan
Austerity, what is it good for?
You wouldn’t download a debt, would you? - The Paul Martin approach to balanced budgets
Healthy spending - Healthcare expenditure and provincial budgets