One of the best decisions the Saskatchewan Party government has made in nearly 10 years of guiding the province was to replace the municipal revenue sharing system with municipal operating grants.
Municipalities shared millions of dollars each year through revenue sharing, but the financial support was unpredictable. The municipal governments willingly accepted a rollback in revenue sharing in the 1990s, when Saskatchewan was buried in debt, but when the province’s finances rebounded, the revenue sharing pool initially remained the same.
Communities started to see an uptick in revenue sharing about 15 years ago, but it was still unpredictable. They might get more money, or they might not. Estevan lost revenue sharing support in 2007. It created a headache for councils during the budgeting process.
That changed in 2009, when the provincial government announced the municipal operating grant system. Municipalities would receive 20 per cent of revenues collected through the provincial sales tax each year, creating a predictable, and seemingly stable, source of revenue that would be distributed on a per capita basis.
It was simplistically beautiful, something you rarely see from governments.
Councils and administrators knew at the start of each year how much money they would receive from the provincial government. Gone were the days of playing the waiting game.
When the economy was great, and people were spending money, communities received more money through the grants. With the province’s economy sliding, people have reduced their spending, and so municipalities are looking at the grants decreasing or remaining stable for the first time in years.
In Estevan’s case, this city received more than $2.4 million through municipal operating grants last year, and they were budgeting a similar amount this year. That money would be directed towards road repairs, policing, the fire department, parks, recreation, cultural services and the many other programs and services the city provides.
Property taxes and fees for services still account for the bulk of the revenues for the city, but municipal operating grants help a lot.
So when Premier Brad Wall suggested to the Saskatchewan Urban Municipalities Association convention last week that the government might be looking at slashing the grants in the upcoming provincial budget, it created a lot of concern.
Many municipalities have already passed their budgets, or are about to pass their budgets.
If the grants go down this year, then municipalities are faced with three choices: increase taxes (even though they have already approved tax rate increases), cut services or cut capital projects. None of these options are desirable.
Now, if the provincial government changes the formula for municipal operating grants and reduces support for municipalities in 2018, then the implications won’t be as severe. The municipalities will receive sufficient notice from the government about the cuts, and can adjust their budgets accordingly.
The government has to do something about their finances. Their revenues are down, thanks to slumps in the prices of oil, gas and minerals, and so expenses need to be trimmed accordingly.
Balanced budgets are great, but they aren’t always attainable, not with the needs that exist in health-care, education, transportation and other departments. At the same time, a deficit of more than $1 billion is troubling.
As Premier Brad Wall stated, everything is on the table, including job losses, wage freezes, funding reductions and tax increases. None of these solutions are ideal.
But it would be unfair for the government to expect cities, towns, villages and rural municipalities to share that burden now. Talk to them in a few months about accepting their share of the burden, starting in 2018.
