Written for the Battlefords Regional Optimist
Crown Profits support Health and Education Projects
Saskatchewan’s Crown Corporations continue to be very healthy and as a result their profits are continuing to provide financial support for health and education projects throughout the province, however, recent policy changes and financial activity initiated by the Brad Wall government are putting all this in jeopardy.
In fact one of Saskatchewan’s leading political columnists, Murray Mandryk of the Regina Leader Post backs that up in his late April column where he states: “But if the good news in 2009 was our Crown corporations’ continued profitability in the face of competition and the need for infrastructure upgrades, the bad news is how the government now views the Crowns.”
He also states: “the government views the Crowns as little more than cash cows in its stable, there to solve whatever financial messes it creates. Combined with the government’s other policies that restrict potentially profitable out-of-province investments by SGI or SaskEnergy (whose now-sold Heritage Gas investment in Nova Scotia made $5 million last year) and we might be headed for serious problems down the road.”
In this year’s provincial budget, the Brad Wall government has projected revenues from the Crown Sector to exceed $1.2 billion when last year and the year before the Crowns provided revenues (through dividends) in the range of $750 million. At the same time the budget indicates that the Wall government will take 100% of the profits from all the Crowns except SaskPower, it also indicates that these Crowns will have to borrow additional money for their activities in 2010/11, and they will have to raise rates for the users of their products and services (ie natural gas, power, and water).
While the Crowns have recorded very good financial years, a couple of things should be noted about how they managed to generate the revenues they have. For example: In 2009 SaskTel saw earnings rise to $129 million, up $5.4 million from the year before, but will borrow $180 million to do a major system upgrade. SaskTel’s debt-to-equity ratio will increase as a result from about 24 percent to 36 percent. The 2009 profit at SaskTel was aided by the sale of one its subsidiaries – the Hospitality Network (which provides communications and entertainment systems to hospitals across Canada) – which turned a $3 million profit last year.
Another example worth noting is SaskEnergy’s $64 million profit in 2009 (up from $56 million in 2008) which was boosted by the sale of its Nova Scotia subsidiary (Heritage Gas – the sale brought in $73.3 million) meaning that there will no future revenue from the subsidiary and the asset is now gone.
In the Legislature, during Question Period, the Wall government has been asked a series of questions that get to the long-term vision, or lack thereof, of the government on future Crown direction, funding, and policies. For example, Moose Jaw MLA, Deb Higgins asked “in a desperate attempt to hide this government’s deficit and growing debt the Premier has not only drained $700 million from the rainy day fund, he’s also stripped over $1 billion from the Crown Corporations. Why does the Premier think it is okay to put our Crown corporations at risk in order to hide his own incompetence and fiscal mismanagement?”
She also asked: “all you have to do is look at the government’s own budget documents, and it shows that Crown debt will increase almost 98% by 2014. With skyrocketing debt and every last cent of profit being stripped to cover the Premier’s incompetence, our Crowns will be a lot weaker and Saskatchewan people will pay a lot more. Why should Saskatchewan people pay higher utility rates for years to come just because he can’t manage the budget?”
Think about it, if Brad Wall needs $1.7 billion from the Crowns to balance his budget in what is described as a good economic year, what is he going to be able to do if the Crowns don’t have the ability to provide a return on investment especially in a year which may not be as economically strong?
