03/18/2013 04:08 EDT | Updated 05/18/2013 05:12 EDT

Saskatchewan Should Depend Less On Resources: Alberta Think-Tank

oil pumps. oil industry...

REGINA - Saskatchewan is being told to reduce its dependence on volatile non-renewable resource revenues.

The suggestion is one of four measures the Canada West Foundation, a Calgary-based think-tank, hopes to see addressed when the provincial government tables its budget Wednesday.

"The province has had huge booms in revenues from potash or from oil in the past, but the problem is that the opposite also happens," foundation senior economist Michael Holden said Monday.

Falling oil revenues have already put a squeeze on Alberta.

The Alberta government delivered a budget March 7 that anticipates a $2-billion deficit on revenues of $38.6 billion.

"In Saskatchewan's case, over the last five years on average about 26 per cent of the province's revenues comes from oil, potash and other resource related revenues," he said.

"Those can fluctuate dramatically from one year to the next and makes it very difficult for a province to plan for the long term or to balance the budget if such a significant portion of its revenue base fluctuates so wildly from one year to the next."

Holden said based on third-quarter results, Saskatchewan's resource revenues will come in $563 million lower than expected in the current budget and the government will have a difficult time making that money up.

Alberta has blamed its financial difficulties on the fact it is getting less for its oilsands bitumen than the North American benchmark for oil, West Texas Intermediate. That has knocked $6 billion off what Alberta had hoped to take in.

The Canada West Foundation said Saskatchewan's crude oil revenues will be hit by the same price differentials that punished Alberta's bottom line.

However, the foundation also said the potash industry makes Saskatchewan's economy somewhat more diversified.

"The fact that the province has this shortfall in resource revenues to deal with this year is obviously an important issue," said Holden.

"We're looking to see how they're going to address that type of issue in the long term."

Premier Brad Wall unveiled a long-term growth plan last October that talks about saving money from non-renewable resources after the debt is fully paid.

But Holden said the foundation would love to see a plan in the budget to begin saving that revenue even before Saskatchewan is debt-free.

Saskatchewan Finance Minister Ken Krawetz suggested the province won't stop using resource revenue to keep its books in the black.

"Clearly the non-renewable resource sector contributes a significant amount of monies to the treasury. It has the been the practice of many, many years that that amount is used to balance a budget and that pattern will continue," Krawetz said.

"Maybe we'd have to look into the future as to changing that percentage."

Krawetz said if the government eliminated non-renewable resource sector from general revenue, it would have to find that money somewhere else.

"So you would either be applying significant taxes or you'd be reducing the programs that you already have."

The foundation also wants to see specific plans in the budget to invest in export-related infrastructure, reform taxes to improve business competitiveness and tackle a labour shortage.

It says labour shortages are the single largest factor limiting economic growth in Saskatchewan.

"We've also suggested improving aboriginal engagement in the workforce," Holden said.

"There are a lot of opportunities in that area, that the aboriginal population is younger and faster growing than the rest of Saskatchewan and there's a lot of untapped potential there."

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