The Yukon government is projecting to be in the red this year, with a projected $12.7m deficit in a $1.79-billion budget that does not shy away from capital spending.
This time in 2020, the picture appeared very different; the government’s budget then boasted a decent surplus of $4.1m.
But like most things, that picture was turned upside down by the global pandemic. By the time fall rolled around, Yukon had shown a $31.6-million deficit due to a drop in tax revenues caused by an economic slowdown and a rise in public health spending.
“That is entirely the result of economic and social supports as well as health services for Yukoners in response to the COVID-19 pandemic,” said Premier and Finance Minister Sandy Silver.
Capital spending and COVID-19 recovery are priorities
The proposed 2021-2022 budget includes a significant increase in spending, with the region predicting strong capital spending to the tune of $434m this year. The government says this is a “record-breaking amount” – up 17% from 2020, and an effort to help the economy recover from the pandemic.
According to the government, some of that capital spending will be offset by federal transfers. Some capital spending highlights include:
$54.3 million for bridges and highways;
$20.1 million for Yukon’s diverse fiber line on the Dempster Highway;
$16.5 million for airports and aerodromes;
and over $15 million for Resource Gateway Road projects.
The state estimates that operations and maintenance spending will come to around $1.35B.
$48.9m for COVID-19 relief
In 2020-2021, the government allocated over $107.5m to managing the pandemic. This year, it is allocating less than half the amount, $48.9m to COVID-19 relief.
Out of this amount, $15m has been included as part of a “COVID-19 contingency fund.”
The contingencies are set aside for unexpected expenses related to the crisis and aren’t included in departmental budgets. They would have to be presented to the Legislative Assembly for approval so as to be spent. If they are not needed, remaining money will be utilized to cover the deficit.
Other budget highlights constitute the following:
$86.8m for continuing care, palliative care programs, home care and day programs;
$15m for supporting a new universal childcare program that vows to save families, with $700 on average per child per month;
$10.5m for a Whistle Bend elementary school;
$70.2m for social supports, substance-use, and mental wellness programs;
$50m to address climate change through clean transportation programs, energy debates, community energy retrofit projects, and fast-charging stations and electric vehicles;
And $5.7m for a secure unit in the Whitehorse General Hospital for those experiencing acute mental health episodes.
“This budget builds on the strong foundation we have developed over the past four years and continues us on the path toward a brighter future for the Yukon,” said Silver on Thursday.
The region’s net debt is expected to go up over the next 3 years because of projected deficit spending in response to the coronavirus, as well as serious infrastructure spending.
The net debt is forecasted to hit $175.4m by the end of the year, with a debt-to-GDP ratio of 5.4%.
Positive about the future
The regional government is positive about the future, though. Over the next 5 years, Silver expects, the GDP growth will continue, averaging 4.7% per year out to 2025.
Yukon is one of the only places in Canada to experience marginal GDP growth in 2020, growing by 0.1% in 2020.
More growth is expected, in part, owing to rises in tax revenue, growth in the mining sector, and increasing capital spending.
Total government revenue is predicted to be $1.37b this 2021, a rise of 5.1% from 2020’s estimates. Tax revenue is projected to rise by 2%.
Drops are expected in personal income tax, and more particularly in fuel oil tax, whereas spikes are projected in corporate income tax and insurance premium tax.
Federal grants, including the Territorial Formula Financing program, represent over 80% of Yukon’s total revenue this year.
This budget is out as Yukon moves closer to a territorial election. Premier Silver has repeatedly refused to provide hints as to when an election could be called. However, all three parties are nominating candidates at the moment.