02/10/2012 11:51 EST | Updated 04/11/2012 05:12 EDT

Flood costs bloat expenses in Saskatchewan; 'thin' budget surplus forecast

REGINA - Flood-related costs have bloated expenses for the Saskatchewan government.

The province's third-quarter financial report released Friday said the cost of dealing with disaster claims, washed-out roads and an excess moisture program for agriculture is expected to reach $360 million this fiscal year.

However, the report also says that should be offset by federal cost-sharing and because the province is taking a $120 million special dividend from Crown Investments Corp. (CIC).

"We've seen a change from our budget. We've seen a change in both revenues and expenditures, but we remain on a balanced basis," said Finance Minister Ken Krawetz.

Overall, general revenue fund expenses are up more than $331 million from the original budget delivered last March. Expenses are forecast to be $11.01 billion.

Krawetz said revenue is higher than anticipated by $271.9 million.

Revenue from Crown land sales and corporate income tax is down. But more money is coming in from the investments corporation, as well as from increased revenue from oil and the provincial sales tax, which is up $94.3 million since budget. Revenue is forecast to be $11.07 billion.

Krawetz said the additional revenue from CIC is all flowing from SaskPower.

"That was one of the positive things of having too much water. Hydroelectricity can be produced more efficiently, cheaper, more can be produced and as a result SaskPower's revenue for 2011 is significantly higher than anticipated," said Krawetz.

"So this was an opportunity for us to balance the costs of flooding with revenue from flooding."

Two years ago, the government took most of the dividends from the Crowns to help balance the books. But the government has been reluctant to strip dividends from SaskPower because it said the utility needed that money for infrastructure upgrades.

Krawetz said it's a balance.

"They're still going to have more retained earnings than what they had actually budgeted for, so we haven't reduced their budget at all," he told reporters at the provincial legislature.

Krawetz said the budget is on track to finish the year with a "pretty thin" $55.8 million surplus — less than half of what was predicted in the budget.

"We hope that there still may be some fall off in expenditures," he said.

The Opposition New Democrats called the third-quarter financial report "misleading."

NDP finance critic Trent Wotherspoon said the government needs to change its accounting to report on a summary basis, which takes into account all areas of government, including Crowns. The third-quarter financial report only includes information about the general revenue fund.

Wotherspoon also argued that it's inappropriate to take money from SaskPower or other Crowns.

"We have Crowns that are borrowing money at this very time to invest in their infrastructure and then are transferring dollars across for a budget that's a deficit and unsustainable," said Wotherspoon.

This is the last financial report for the 2011-2012 fiscal year.

The government will deliver its new budget in March, but Premier Brad Wall has already warned people against big expectations.

Wall recently told delegates at the Saskatchewan Urban Municipalities Association convention that they should not be budgeting for any interim infrastructure money from the government over and above revenue-sharing that is already in place.

He said a fall in corporate income taxes and softening potash revenues are posing a challenge to the bottom line.