SURPLUS FORECAST DESPITE EQUALIZATION AND DROUGHT CHALLENGES

The Province is forecasting a $100,000 surplus for the year, despite equalization and drought-related challenges.

Finance Minister Eric Cline released the 2002-03 Third Quarter Report this morning.

An increase in forecast prices for oil and natural gas and higher income tax revenues have resulted in higher than expected own-source revenues three quarters of the way through the budget year. Own-source revenue - the money generated by economic activity within Saskatchewan - is now projected to be $708.6 million higher than forecast in the provincial budget.

On the other hand, as was the situation at mid-year, the drought has impacted operating spending, which increased $92.7 million over budget, requiring an additional $28.4 million transfer from the Fiscal Stabilization Fund to maintain a surplus budget this year. Government debt increased $503.3 million over budget, also mainly due to the drought.

"More than 75 per cent of the increased expenditures are directly related to the severe drought," Cline said. Saskatchewan Environment is projected to be up $49.6 million over budget, due largely to higher forest fire fighting costs, and Saskatchewan Agriculture, Food and Rural Revitalization is projected to be up $25.5 million over budget, largely due to drought assistance for livestock producers.

Equalization receipts - transfers from the federal government - are forecast to drop another $50 million from the mid-year projection, directly offsetting the forecasted increase in Corporate Income Tax revenue, resulting in a $650.3 million decrease in equalization from the budget estimate.

"Saskatchewan is still waiting for word from the federal government on whether or not the federal Equalization Mining Tax Base problem will be addressed," Cline said, noting the change negatively impacted equalization receipts to Saskatchewan in the amount of $298.4 million at the mid-year point.

"The impact of this change was unanticipated, and I have met with Federal Finance Minister John Manley to express Saskatchewan's concerns. Simply put, we cannot afford this significant and unexpected loss," Cline said, adding future year receipts could be reduced by more than $100 million annually.

"Despite the fiscal challenges beyond our control that we have faced so far this year, we continue to manage the province's finances in the prudent, responsible manner Saskatchewan people expect," Cline said.

The Third Quarter Report can be accessed at www.gov.sk.ca/finance.

-30-

For More Information, Contact:

Lorri Thacyk Finance Regina Phone: (306) 787-6605 Email: lthacyk@finance.gov.sk.ca