A Moment with the Mayor: Deficits and Surpluses

When the term “deficit” arises, it usually raises concern for anyone on a board, within an organization or on a council. Anyone involved in organizing something that involves money—or profit and loss—can understand the uneasiness that comes with the possibility of a deficit. On the other side of the coin, there’s often excitement and satisfaction when an event, fundraiser or campaign generates a profit or surplus.

At all levels of government, we frequently hear about deficits and surpluses. At the federal and provincial levels, deficit budgets are common, with the occasional balanced or surplus budget. Another often-used phrase is “a return to a balanced budget.” Occasionally, someone may express hopes of addressing the outstanding debt in the future, often without a clear or transparent explanation of when, how or by whom that debt will be serviced.

This is a key concern for those who shape national monetary policy and plays a role in determining a province’s creditworthiness. Debt ratios also affect borrowing rates, acting as a measure of each province’s fiscal strength.

At the municipal level, debt is a very real issue and must be carefully managed. Municipalities are required to pass a balanced budget each year. The City’s budget is approved annually by Council and is funded through a combination of property taxes, government grants, user fees, municipal reserves and, if necessary, borrowing for capital items. The goal is to finish each fiscal year with a small surplus to avoid ending in a deficit position. Meeting financial obligations is a driving factor behind the City’s priorities, which form the foundation of our overall financial well-being.

One of the tools the City uses to balance both operational and capital budgets is drawing from reserves. This helps maintain a reasonable tax rate while still supporting municipal services and infrastructure. In recent years, the City has drawn from reserves to complete various projects. Thanks to cost savings and projects finishing under budget, we’ve ended the year in a surplus position, which allows us to replenish those reserves.

The City’s financial team works diligently to manage surpluses and avoid deficits, which can be a challenge even in the best of times. In practice, any potential deficit is typically anticipated well in advance and addressed during the fiscal year. As a result, it is highly unlikely that the City would end the year in a deficit position. If a deficit does occur at year-end, the municipality is required to use reserves or allocate future income to cover the shortfall and return the budget to balance.

This proactive approach stands in contrast to other levels of government and leaves one wondering why all levels aren’t required to balance their budgets.

Mayor Gerald S. Aalbers
City of Lloydminster