Saskatchewan posted its 11th-consecutive balanced budget on Wednesday, but needed help from the province’s Fiscal Stabilization Fund and a number of tax hikes.

The $6.48-billion budget included a surplus of $61.7 million in for fiscal 2004, thanks largely to $275 million from the rainy day funds. The government is projecting a balanced budget in the coming fiscal year, after adding back a $158 million injection from the FSF. The remaining $144 million in the fund is expected to be used to bring the following year’s finances into balance as well.

Finance Minister Harry Van Mulligen blames the underlying shortfall on extraordinary events and “the spiraling costs in our health care system”.

In a report, BMO Nesbitt Burns Inc. senior economist Douglas Porter, noted the broad theme in many provincial budgets so far this year has been the pressure of weak revenues and rising health care costs, countered by other spending restraint and some increased excise taxes.

“Saskatchewan’s budget fits right into that pattern and extends it,{“ Porter said. “While health care spending will rise 6.3% in the coming year, overall operating outlays will rise by just 0.8%. About 500 public sector positions will be cut.”

Saskatchewan said revenues are expected to increase just 1.8% next year, even as the provincial sales tax rate will be hiked by one percentage point to 7% (still the second lowest in the country) and tobacco taxes will be raised 1.5 cents/cigarette. As well, the indexation of personal income tax brackets and credits will be reviewed each fall starting next year, depending on the province’s fiscal situation.

The budget plans are based on a GDP forecast of 2.6% versus last year’s 3.9% rebound from the devastating droughts in 2001/02. The province bases that on a 35% drop in resource revenues in 2004, based on the very conservative assumption of average oil prices of US$26.50/barrel. Gross borrowing needs will rise in the coming year to $1.44 billion from $1.14 billion in FY02/03. Government debt is projected to climb to $8.29 billion from $8.08 billion currently, taking the debt/GDP ratio up to 23.3% from 22.8% – a rare rise, Porter said.