Provincial Budgets

March 19, 2025 | 17:49

Saskatchewan (FY25/26) — A Delicate Balance

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

The Province of Saskatchewan is projecting a small $12.2 million surplus in FY25/26, a positive turn after a $661 million deficit now estimated for FY24/25. The latter is a modest improvement from the most recent fiscal update that called for a $744 million shortfall. The better fiscal position comes on the back of higher revenues across the major taxation and non-resource categories, and the Province sees surpluses persisting through the FY28/29 forecast horizon.

That said, Saskatchewan is not explicitly building in a trade-war impact, instead basing the budget on a recent consensus, and waiting to see how the situation actually evolves. The Province notes that a scenario with 25% tariffs by the U.S. on Canadian exports (10% for energy) and retaliatory tariffs on $155 billion of Canadian imports, could cut revenues by up to $1.4 billion.

The budget also has a few notable measures, including a reduction in the basic personal exemption (and spousal and dependent equivalents) by $500/year starting in 2025 and lasting the next four years. The Province calls this move its largest personal tax cut since 2008.

Additional tax measures include:

Enhancing (by 5%) the Low-Income Tax Credit starting on July 1 for the next four years
Bringing back (and making permanent) the Home Renovation Tax Credit for expenses of up to $4,000 per year on a primary residence; and, making the PST rebate for new home construction permanent
Expanding the First-Time Homebuyers' Tax Credit from $10,000 to $15,000 for qualifying homes
Boosting the Graduate Retention Program Tax Credit by 20% on or after October 1, 2024

Total revenue is projected to rise a sturdy 3.2% to $21.1 billion in FY25/26. Taxation and non-renewable resource revenues both rise solidly, with the latter coming in at $2.7 billion. The Province is assuming that WTI averages $71 in FY25/26, which is a touch higher than levels on budget day, but reasonable. Potash prices are expected to rebound to US$239, up from $223 in FY24/25. And, the Canadian dollar is pegged at 70.4 US cents, very slightly stronger than budget day levels. All told, there's very little room for movement on resources prices or the currency if these budget targets are to be met.

Note: A $1 increase in oil prices would lift revenues by $18 million; a $10 increase in potash would add $56 million; and a 1 cent increase in the value of the Canadian dollar would cut $47 million.

The revenue outlook is based on consensus economic forecast that was taken before significant trade-war concerns broke open, thus leaving the door open to downside risk. Real GDP growth is projected to pick up to 1.8% in 2025 from 1.6% last year. Nominal growth, however, is expected to cool to 2.6% after bouncing 4.2% in 2024. Given that we have built tariffs into our outlook, we see slower growth in Saskatchewan this year at +0.8%. That said, we view the province, with exposure to oil and potash, as less vulnerable to the trade war than manufacturing-heavy economies in Central Canada, although additional Chinese tariffs on canola do pose an added risk.

Total spending is projected to hold flat in FY25/26 at $21.0 billion. Meantime, Saskatchewan continues to run a strong capital spending program, and that will accelerate again this coming fiscal year to $4.6 billion. That will mark the peak in spending under the Saskatchewan Capital Plan, but levels will remain high in the $4.2-to-$4.5 billion range over the following three years. Transportation, municipal infrastructure and health care are big target areas, along with Crown Corporations such as SaskPower.

Total borrowing requirements will step down in FY25/26 to $4.0 billion from $5.0 billion in FY24/25. Of that total, $1.1 billion will be for operating purposes, and $1.8 billion for capital spending. Crown Corporations make up the remainder. Net debt will rise again to 14.6% of GDP, which is still near the very low end of the provincial spectrum, but pushing higher again after sitting below 13% in FY23/24.

Bottom Line: Saskatchewan will project a rare balanced budget for FY25/26, at least as of the budget season. However, there are risks to this fiscal plan, with resource price assumptions offering little wiggle room, and an economic outlook that doesn't provide a cushion against a potential trade war. From a big-picture perspective, Saskatchewan is still in a favourable spot on the provincial fiscal landscape.