The Saskatchewan government is contemplating a delay in fulfilling two changes promised in last year's budget, both of which will impact property taxes. One, the promise to shift education funding away from property taxes and onto provincial coffers, the second, to increase municipal revenue sharing. The former should be implemented immediately; the latter should be put on hold. 

Municipal revenue sharing and school property taxes were both on the front burner of Saskatchewan politics for many years, though furor over property taxes was always greater. While British Columbia and the Atlantic provinces did not use municipal property taxes to pay for schools whatsoever, Saskatchewan relied on them more heavily than anywhere else in Canada. Last year's budget was a giant leap forward as increased dollars from the province brought its share from 51 up to 63 per cent of total K-12 education funding.

But that wasn't all. The province also took control of mill rates for school property taxes across the province, ensuring its increased funding would not simply lead to more spending by school boards and, therefore, a tax increase. Provincial funding was to increase even further in 2010-11, meaning general revenues would pay for 66 per cent of the total, leaving the rest to school property taxes. It is this further change that is now in jeopardy.

It's a similar story for municipalities, who are now receiving record funding from the province. Last year's budget dedicated 0.9 of the 5 per cent PST towards municipalities, scheduled to rise to a full 1 point in 2010. This meant the province, which gave $135 million to municipalities in fiscal 2008, would grant $167 million next year and would give $220 million in 2010. Again, that additional bump might not take place.

There are two main differences between municipal revenue sharing and school funding that make the latter the best choice for budget dollars. With the province taking over both the property tax and general revenue sides of school funding, lowering general revenues will have one of two consequences: less money for schools, or higher school mill rates to make up the shortfall. Bye-bye property tax reduction.

On the face of it, giving less money to municipalities would mean higher property taxes as well. But in an ironic twist, less money for municipalities might be good for taxpayers overall.

Like a fish that grows to the size of its environment, municipalities have simply taxed and spent more due to provincial revenue sharing. Consider that last year, even with record transfers from the province and higher assessment values, mill rates failed to drop in Regina and even rose by 2.87 per cent in Saskatoon. Ironically, the extra $7.7 million the City of Regina received from the province for revenue sharing was precisely equal to the amount given for salary increases at City Hall.

These dollars exclude the millions more given to municipalities each year through annual capital grants and special ‘stimulus’ grants. Projects driven by the deficit-spending federal government have also meant additional provincial funds of $25 million for Saskatoon and $20 million for Regina. This in and of itself is almost enough to offset the $53 million bump in funding that the province is reconsidering for the upcoming budget.

While it’s true that balancing the budget next year will take some difficult decisions, some are easier than others. In the battle of school funding vs. municipal revenue sharing, schools deserve to win hands down. Municipalities that want to overspend should have to justify their tax increases to citizens and not place the blame on another level of government.