03/12/2014 03:03 EDT | Updated 05/12/2014 05:59 EDT

Saskatchewan Premier Brad Wall warns rural leaders of tighter budget

REGINA - Saskatchewan Premier Brad Wall is cautioning rural leaders that the provincial budget next week will be tight.

Wall made the comments Wednesday to reeves and councillors at the Saskatchewan Association of Rural Municipalities annual convention.

"It happened in our first term in 2009, this counter-intuitive occurrence of a strong economy and weaker revenues," said Wall.

"It happened because of potash in '09. It'll happen in part because of potash revenues this year, where our economy will remain strong but government revenues will be flat. And so we're going to have to make sure we make the right decisions to keep the budget balanced."

Potash revenues collapsed in 2009, leaving a big hole in provincial coffers.

Potash is a mineral used primarily as fertilizer. Saskatchewan collects billions in tax and royalty revenue from companies that mine the resource.

Demand softened and prices fell last year after Russian-based Uralkali, one of the world's largest potash producers, quit an export partnership. China and India — key markets for fertilizer — then delayed purchases in expectation of lower prices.

The Saskatchewan government said in its third-quarter financial update in February that potash revenue is expected to be down just over $179 million from the budget estimate last March.

The province said it would have to take $135 million out of its savings to offset the shortfall in its general revenue fund.

Wall mused after the Saskatchewan Urban Municipalities Association convention last month that money for infrastructure projects could come from higher school taxes.

"We have looked at the tax options. You heard what I had to say to your counterparts at SUMA. I'm not going to announce what is in or not in the budget today," he told the rural leaders.

"But I would just tell you that if this government ever looks at any kind of revenue increases on the tax side, it will have been born of a last resort."

The premier later acknowledged to reporters that there has been "at best, mixed feedback" to the idea of raising the education part of property taxes to pay for things such as roads and bridges.

There was "some support, more opposition."

Wall said the government will try to keep spending increases in the neighbourhood of three per cent.

The budget is to be tabled next Wednesday.