If skyrocketing oil and gas revenues helped Alberta’s provincial government pay off its debt, couldn’t skyrocketing resource revenues allow Saskatchewan to do the same?

The answer of course is “yes.” After all, if the government doesn’t pay off the debt during the good times, how is it going to pay it off during the bad times?

That’s why the Canadian Taxpayers Federation has started a petition for the provincial government to make debt repayment a priority and to set a long term goal for Saskatchewan to become debt free.

After all, the sooner the debt gets paid off, the less the government pays in interest costs each year. It’s quite similar to paying off the principal on your credit card. The sooner you do it, the less you pay in interest costs over the long term.

Consider that for 2010-11, the province is expected to spend about $430 million in interest costs on the debt. That’s about 3.9 per cent of total government spending.

To put that into perspective, for 2010, Saskatchewan residents and businesses are estimated to have paid about $596 million in school property taxes. In other words, if the debt was paid off, the province could use the annual savings from eliminating interest costs to reduce your school tax bill by about 72 per cent.

Alternatively, the province could use the savings to just about cut the provincial sales tax from 5 per cent down to 3 per cent. Either way, using the savings from eliminating interest payments to reduce taxes is a win-win for both taxpayers and the economy.

You’re probably wondering just how big the debt is and if it’s possible for the government to eliminate it anytime soon.

The government’s core debt, not including crown and agency debt, is about $6.4 billion. However, the government has approximately $2.3 billion invested in a fund for paying down the debt in the near future. Thus, the unfunded debt is about $4.1 billion.

That sounds like a lot of money, and it is, but consider Saskatchewan’s resource revenues over the past decade. In 2001-02, resource revenues represented ‘just’ $903 million. The next year they climbed to $1.2 billion – a 38 per cent jump.

Resource revenues continued to climb until they hit a staggering $4.6 billion just prior to the economic slowdown. Last year they dropped to $1.9 billion and are expected to climb to $2.6 billion for 2010-11.

Beyond resource revenues, the government has also seen corporate income tax revenues skyrocket. In 2001-02 business income tax revenues represented $145 million of government revenues, but by 2010-11 they had climbed to $1.1 billion. That’s an increase of about 660 per cent.

What’s interesting is that the revenues increased at the same time as business income tax rates were reduced from 17 per cent to 12 per cent.

With money literally pouring in from resources and business income taxes, it’s time for the government to direct a good portion of it for paying off the debt. By making debt repayment a priority, five years from now, the province could easily find itself debt free and in the enviable position of asking “what next?”

The first step however, is to ask “why not a debt free Saskatchewan?”