COMMENTARY - In recent weeks the future of our resource sector has been top of mind for many as bids to purchase the Potash Corporation of Saskatchewan emerged. While ownership of the companies that mine our resources dominates the debate, policy makers in Saskatchewan need to focus on the long term effect of our resource-based economy instead of squandering this wealth in the short term. The current practice of using one-time non-renewable resource revenue to fund ongoing programs is like selling your car to pay for this week’s groceries. The most responsible and rational approach to public finance is to decrease spending and invest our resource wealth in a sovereign wealth or heritage fund.

In the 1970s, the Netherlands experienced unprecedented wealth and economic growth due to soaring oil prices. Skilled labour, government resources, and public infrastructure shifted to the oil economy. When oil prices declined, the economy declined even faster as a nation dependent on resource wealth found it difficult to adjust to the changing marketplace.

There’s an economic term for this: Dutch Disease.

Norway learned from the Dutch lesson that too much government spending during inflationary times can impede overall market growth. In 1996 they established their sovereign wealth fund by removing the surplus wealth from their own resource market and investing it abroad. The fund is now the second largest of its kind in the world, professionally managed to eliminate political intrusion, and highly diversified to reduce dependency on external market forces. The effect is a highly diversified economy that is not dependent on its oil revenues for growth and is sheltered from the wild fluctuations imposed by external market conditions.

Norway learned from the lessons history afforded it and are now reaping the benefits. The hard-working honest people of Saskatchewan recognize the lesson our history provides, and so too must our elected officials.

- Ryan Bater, Saskatchewan Liberal Leader

Saskatchewan Future Fund

The extraction of natural resources is an important part of the Saskatchewan economy and provides significant revenue to the government of Saskatchewan in the form of resource royalties. These resource royalties, by their very nature are ‘one-time’ dollars, that is to say that a particular barrel of oil or tonne of potash can only be extracted and sold once.

It is unwise for the Saskatchewan Government to fund ongoing expenditures such as health care with volatile, one-time dollars that come from resource extraction. This leads to problems like the unexpected budget gap of 2009-10 due to miscalculated potash royalty revenue.

Other countries and jurisdictions rich in similar natural resources have established ‘Sovereign Wealth Funds’ (like the Alberta Heritage Fund) in order to generate ongoing revenue for government in perpetuity so future generations can benefit from today’s one-time resource extraction.

The Saskatchewan Liberal Party supports the creation of a sovereign wealth fund (Saskatchewan Future Fund) for the province of Saskatchewan. A Saskatchewan Liberal Party Government will mandate that a minimum percentage of one-time resource dollars be committed to the Saskatchewan Future Fund for the benefit of Saskatchewan residents today and for generations to come.