Here's Exactly How Finance Minister Donna Harpauer Has Misled Us On Sask Crop Insurance
As far as I can tell, it's game over for this 60-year-old, once highly-profitable rural Saskatchewan institution. What an absolute shame.
In November 2021 Donna Harpauer held a mid-year fiscal update in the Legislature.
In that update, as well as in the Sask Party government’s related news release, Harpauer blamed farmers for her projected multi-billion dollar deficit for the 2021-22 fiscal year.
“If you backed out the expense of crop insurance as well as the livestock producer support we would almost be balanced,” Harpauer told reporters. “That is how significant that support was for our agricultural producers.” - Donna Harpauer, November 29, 2021, Global Saskatoon
Lol.
The Sask Party has been significantly supporting Saskatchewan agricultural producers since never.
The truth is that Saskatchewan farmers and provincial taxpayers had already paid, well in advance, for 2021’s crop insurance payouts, however Finance Minister Donna Harpauer and the Sask Party government have spent every single penny of SCIC’s surplus cash.
As you likely learned in high school economics, insurance companies make money - a lot of money - by investing their customers’ premiums, which ideally, typically are worth far more than their claims.
In 2012, one year after the Sask Party won their second term by a landslide, the Sask Party government drained SCIC’s cash investments and started spending crop insurance surpluses on government operations.
Therefore, in 2021, Donna Harpauer and the Sask Party government had to borrow billions of dollars to pay back what they took from SCIC.
To understand this issue, let’s go back to SCIC’s and the Government of Saskatchewan’s financial reports for the fiscal year 2021-22, which covers the 2021 crop season that Harpauer was referencing.
2021’s unprecedented drought meant insurance payouts for Saskatchewan ag producers soared to an unprecedented, staggering $2.6-billion that year.
This record-setting number represented roughly seven to ten times the average SCIC annual payout.
However you’ll also note that despite the $2.6-billion in payouts, by the end of fiscal year 2021-22, or four months after Harpauer blamed farmers for her government’s incompetence, SCIC still had a $1.2-billion surplus (see: bottom line of same column).
Now let’s turn our attention to Saskatchewan’s Public Accounts for fiscal year 2021-22.
Public Accounts are two separate documents, Volume 1 and 2, released every year with the Government of Saskatchewan’s line-itemized accounting for the previous fiscal year.
In ten separate references, 2021-22’s Public Accounts Vol 1 vaguely blames drought-related crop insurance payouts in 2021 for negative variances between the Sask Party’s 2021-22 budget and reality.
For example, they blamed crop insurance for a chart that showed the government’s expenditure on agriculture in 2021-22 was $3.19-billion. That’s almost as much as went into public education.
Yet in 2021-22’s Public Accounts Vol 2, which breaks down expenses, there’s no reference to a $3.9-billion for Agriculture.
As you can see (might have to squint) above, in 2021-22, the provincial government’s Total Expenditure for Agriculture was $528.4-million (second last column on the right), not $3.9-billion. In fact, despite what Harpauer said about producers crippling her budget, Agriculture came in $9-million under budget that year (last column on the right).
Here’s another table from SCIC’s 2021-22 annual report showing the agency’s full financial position for that year.
The General Revenue Fund (GRF) owed SCIC $2.6-billion at the end of 2020-21, followed by $1.2-billion at the end of 2021-22.
Note 4 explains why:
Reading that was a light bulb moment for me.
I remembered that in 2018 I learned about the Consolidated Offset Bank arrangement (known as “cobbing”) from a sitting Sask Party MLA who had concerns that it was being abused.
Unclear what “cobbing” meant, at the time I sent an email to a former Deputy Minister of Finance to get more information.
Here was the response:
Put simply, SCIC doesn’t have it’s own bank account. Instead, it deposits all its revenues, including transfers from the provincial and federal government as well as Saskatchewan farmers’ premiums, directly to the GRF.
These deposits are considered a loan to the Government of Saskatchewan at an insanely low interest rate.
Between 2010 and 2021, Saskatchewan’s Crop Insurance Corporation had three bad crop years: 2010, 2011 and 2016, totalling just over $200-million in losses. During the same time period, the company racked up $2.6-billion in surplus, which was deposited into the GRF as a loan that did not show up as public debt.
In other words, the Sask Party government “borrowed” billions of dollars from SCIC and hid it.
In 2010, SCIC had $411-million in investments and $57-million on “loan” to the GRF.
By the end of 2014-15, the Sask Party government had drawn down SCIC’s investments to next to nothing ($12-million) and by 2023, the $2.6-billion in surplus was almost gone.
“Should there be a major crop failure, the SCIC would call on the GRF for sufficient cash to pay the bills. The GRF would have to borrow the money in the open market…” - Former Saskatchewan Deputy Minister of Finance, March 14, 2018.
Guess what?
There was a major crop failure in 2021, to the tune of $2.6-billion.
Sure, you can argue that the weather was responsible for those payouts, not the Sask Party government.
That’s not the point.
Had the Sask Party properly invested the billions of dollars SCIC accumulated in surplus, at a proper rate of return (at least higher than 0.19% FFS), SCIC would have had billions and billions of dollars on hand to pay 2021 and 2022 indemnities.
But no, the Sask Party had already spent it.
Therefore in 2021-22 the Sask Party had to add to the public debt by borrowing the cash - almost $1.4-billion - to pay back what farmers and taxpayers had already contributed to SCIC, so the corporation could pay its indemnities.
Remember, this is a government led by a morally and financially bankrupt clown who calls climate change-risk mitigation an “ideological whim” and declares “I don’t care” when confronted with his province’s insanely high, internationally-embarrassing emissions record.
Because of this, we know the Sask Party government recklessly spent Saskatchewan crop insurance profits believing they’d never see a devastating, weather-related crop failure like the one we did in 2021.
Except then it happened again in the crop year of 2022, for which $1.52-billion was paid out for failures.
According to Donna Harpauer just a few days ago, 2023’s crop year won’t be much better.
Yet after paying back $395-million in 2022-23 there’s only $848-million of SCIC’s money still on “loan” to the GRF.
If Saskatchewan crop insurance indemnities for 2023-24 follow the multi-billion dollar pattern set already, not only will the Sask Party have to come up with the entire $848-million it owes from the GRF, but perhaps hundreds of millions of dollars more, because SCIC has virtually no cash in the bank and no real cash investments left.
The federal government isn’t going to backstop SCIC more than it already does (the feds kicked in almost half a billion dollars in 2022-23. F*ck Trudeau, ammiright?).
This means in order for SCIC to remain operational going forward, farmers’ premiums would have to go up even higher and the Saskatchewan taxpayer will be on the hook for the rest, which could mean hundreds of millions or even billions of dollars.
Or, the Sask Party government will privatize crop insurance, which I suspect has been the plan all along.
Run SCIC into the ground, then declare it unsustainable.
In spring 2018, after receiving that tip, I gave former NDP MLA and Opposition critic Cathy Sproule the information on cobbing and she asked Donna Harpauer about it.
Despite the fact she apparently couldn’t remember anything when confronted about her bullshit in 2021, Harpauer knew exactly what Sproule was asking.
Harpauer knew immediately, because SCIC is not the only government agency that deposits its cash into the GRF, it’s just the biggest one. We know this from Public Accounts Vol 2, which details the paltry level of interest being paid back to these agencies for the privilege of “loaning” the GRF their extra cash:
I checked eHealth as an example and yep, there it is.
Back in 2018, Harpauer absolutely choked when Sproule dropped the billion dollar question on crop insurance:
Lol: “…we have no way of answering that,”… but also, “Yes.”
The Auto Fund did not play Sugar Daddy to SCIC in 2021-22; instead it earned over a $100-mil in one year on the unbelievable $3-billion it has in investments, unlike the SCIC.
You could argue that even if the money had been invested it would have only bought us another year or two, because SCIC was never going to be viable in light of the current situation with weather and climate across the planet.
The thing is, Donna Harpauer and the Sask Party knew about the possibilities with crop insurance as early as 2018, but did absolutely nothing to mitigate the risk. Instead, they did the opposite by continuing to pillage the company, rendering it today almost bankrupt.
In 2021, the Agriculture Producers Association of Saskatchewan (APAS) called Harpauer out on exactly what I just broke down for you in detail.
“It’s not fair to blame producers for a provincial deficit in a drought year when that surplus gets used up… If the Crop Insurance surplus had been invested in a dedicated fund like the SGI Auto Fund, then that money would have been readily available for paying Crop Insurance claims.” - APAS news release “Surplus in Saskatchewan Crop Insurance account needs to be recognized”, December 1, 2021
At that point Donna had the opportunity to be honest and transparent about what was really going on. That the money in SCIC was gone and Saskatchewan taxpayers would need to take on more debt to pay it back.
Instead, Donna Harpauer lost her everloving shit.
“It’s an attack on our government,” raged Harpauer, boldly doubling down on the lie.
“In the future we hope APAS will remember that our government has been steadfast in its commitment to our agricultural producers, and that APAS doesn’t take that support for granted the next time it considers making such a reckless statement.” - 2021 letter to APAS from Donna Harpauer and David Marit.
Harpauer had the opportunity to tell the truth, but she refused.
Instead she freaked out because how dare farmers question the Sask Party.
I’m not surprised that Donna Corleone Harpauer would put something out threatening and unhinged, but it blows my mind that the Minister of Ag would sign it too.
The audacity, the gall, is breathtaking.
Not only did Saskatchewan farmers already pay for future indemnities, but now they’re having to pay them again, alongside all Saskatchewan taxpayers, because the Sask Party government spent the money, lied about it, and now we’re all on the hook for billions more dollars than we would have been had the Sask Party even tried to run it efficiently and profitably.
They didn’t, and today Saskatchewan’s Crop Insurance Corporation is not remotely sustainable. It’s virtually bankrupt - drained of all profits by the Sask Party government, probably deliberately. A strong provincial service that has served Saskatchewan farmers for decades - I remember my grandfather talking about it in the 80s - and now it’s just… gone.
A 60-year agricultural institution, but the supposedly rural Saskatchewan-supporting Sask Party has destroyed it.
If extreme weather patterns continue to hold into 2024, there will be hundreds of millions, if not billions of dollars in annual crop insurance deficits for the taxpayer to shoulder, on top of the almost billion dollars we already pay into it annually in subsidies.
I’m going to talk directly to rural Saskatchewan to close this piece:
Look, we get it. You don’t feel like the Saskatchewan NDP deserves your vote again. I don’t disagree with you.
Thing is, the Sask Party has gerrymandered the province’s ridings to the point that urban voters don’t matter anymore.
Only you, rural Saskatchewan voters, have the power to get things back on track in our province.
If you’re going to vote unilaterally for the Sask Party, could you please at least try to hold them to account?
Asking for a province and its future.
Have a great weekend,
