Regina: The Frontier Centre for Public Policy today released a paper that critiques the decision by the Saskatchewan government to take 100% of the 2010 profits from Crown corporations (with the exception of SaskPower)—a departure from previous practice. The paper, Saskatchewan’s Commercial Crown Corporation Dividend Policy—Change isn’t always Progress, notes even the Saskatchewan government admits this is unsustainable.
Authored by Sheldon Schwartz, former Assistant Deputy Minister of Finance and former Chief Financial Officer and Vice President of Finance and Administration for Crown Investments Corporation (CIC), the paper also notes that:
- A uniform 100% dividend rate on 2010 commercial Crown profits (except for SaskPower) is a change from previous practice whereby the CIC Board determines each commercial Crown’s ability to pay dividends after allocating a portion of its cash profits to reinvestment and to debt reduction, if necessary to achieve its debt ratio target.
- Each Crown corporation’s debt ratio target is based on industry benchmarks. CIC uses a Crown corporation’s debt ratio as a primary indicator of its financial health.
- While Saskatchewan’s general government purpose debt is expected to remain static over the next four years at $4.1 billion, government business enterprise debt (almost totally comprised of CIC commercial Crown corporation debt) is forecast to balloon both in absolute terms and relative to the size of Saskatchewan’s economy. This Crown debt is expected to nearly double to $5.9 billion by March 31, 2014 from $3.1 billion at March 31, 2010.
“To take 100% of the 2010 profits of commercial Crown corporations other than SaskPower as a dividend is neither a commercial dividend policy nor a sustainable one,” writes Schwartz. “If Saskatchewan were to continue the current year’s practice, it would represent a large step backwards from applying best practices to the governance of Saskatchewan’s commercial Crown corporations.“
The paper, Saskatchewan’s Commercial Crown Corporation Dividend Policy—Change isn’t always Progress, can be found HERE.
About the author: Sheldon Schwartzworked for the Province of Saskatchewan for 25 years, including as Assistant Deputy Minister of Finance, responsible for Saskatchewan’s treasury and debt management functions and as the Chief Financial Officer and Vice President of Finance and Administration for Crown Investments Corporation, the Province’s holding company for its commercial Crown corporations. Born in Regina, he has a Masters degree in Economics from Carleton University, and holds the Chartered Financial Analyst (CFA) designation.
For additional comments and/or background on the study, or to contact the author, Sheldon Schwartz, contact: