Saskatchewan has lost its AAA credit rating, according to the Standard and Poor’s bond rating agency.

Saskatchewan’s economy is strong so there’s no need for panic, but this is sad news. A little more than two decades ago, Saskatchewan’s credit rating was on the junk heap. It took years of hard work to get our marks back to the top of the class. Now we’ve slipped, but if we take action now, we can turn it around.

Credit ratings for governments are like credit scores for individuals. People who keep debt low and pay bills on time generally get better mortgage rates. It’s the same for governments and a few years ago Saskatchewan had all but beaten its debt and earned Standard and Poor’s highest credit rating: AAA.

Unfortunately, Saskatchewan hasn’t paid down debt for a few years. Last year, the debt started going up. The budget included $700 million in borrowing for infrastructure. Then the operational budget fell into deficit as resource revenues dropped. Standard and Poor’s issued a warning last October that the combination of continued borrowing and low commodity prices could result in a downgrade.

Since then, resource revenues have been slow to rally and the borrowing has increased.

This year, the operational deficit is $434 million and infrastructure borrowing has soared to $1 billion, although the government promised “transformational change” to control spending and promised not to increase spending next year.

Standard and Poor’s has seen enough and dropped Saskatchewan’s credit rating. It projects low resource revenues, although it notes Saskatchewan’s diversified economy means the province is in better shape than Alberta or Newfoundland. However, it also projects a lot of borrowing.

“Saskatchewan will borrow about $4 billion from fiscal 2017 to fiscal 2019,” according to Standard and Poor’s. “We expect total tax-supported debt to increase to $15.4 billion at the end of fiscal 2019.”

Standard and Poor’s also gave Saskatchewan another “negative outlook” warning which means this may not be the last downgrade.

Ultimately, credit downgrades can lead to higher interest rates on debt and Saskatchewan already spends nearly $300 million on interest charges every year.

Talking about a credit downgrade is about as fun as taking home a bad report card, but we can turn this around.

We can’t control commodity prices, but we can choose what to do with resource revenues. In the past, the province used some of those windfalls to pay down debt. More recently, Saskatchewan has spent the money. Three years ago, the province hired former University of Saskatchewan president Peter McKinnon to make a plan to put resource revenues into a savings account so that we can benefit from the interest for generations. That plan has been gathering dust. It’s time for a sovereign wealth fund to become a reality.

We can also choose to control spending. The Saskatchewan government has promised not to increase spending next year. This year’s budget actually increased spending by 2 per cent, but if it had held the line, the province would have saved nearly $300 million.

Despite its negative outlook, Standard and Poor’s took the recent provincial election as a commitment to fiscal responsibility.

“In our view, [the provincial election result] reflects a broad political consensus on fiscal policies to enact structural reforms, pass budgets, and make unpopular decisions, if necessary,” stated the release.

In other words, folks in Saskatchewan know it doesn’t work to keep spending more than we have and we’re willing to do the work to get back on track.

This consensus was obvious during the campaign. The Saskatchewan Party promised to cut millions from healthcare administration. The NDP promised to cut the size of cabinet.

There may be debates on where to trim spending, but there’s consensus that the trimming needs to happen. And it better happen soon or we will keep hearing sad news from Standard and Poor’s.