June 2, 2010
Saskatchewan’s Commercial Crown Corporation Dividend Policy
Change Isn’t Always Progress
One might expect that a public debate over Crown corporation dividend policy might be the cure for insomnia. Not so in Saskatchewan, where dividends from commercial Crown corporations are a major revenue item in the provincial budget and a thus matter of public interest.
Recently, there has been controversy in Saskatchewan over the provincial government requiring all but one of its commercial Crown corporations to pay 100% of their 2010 profits as a dividend.1 The Saskatchewan government admits this is unsustainable.2
At the same time, in recognition of its significant investment requirements, Saskatchewan has simultaneously afforded SaskPower, its largest commercial Crown corporation, a dividend holiday for 2010, the second year in a row.
A little background
Crown Investments Corporation of Saskatchewan (CIC) is the holding company for Saskatchewan’s investments in its subsidiary commercial Crown corporations such as SaskPower, SaskTel, SaskEnergy and SGI. CIC receives dividends from its subsidiary Crown corporations. CIC in turn pays dividends to the province’s General Revenue Fund (GRF) to help fund government priorities.
In 1997, the CIC Board approved a new dividend policy for its commercial Crown corporations.3 Based on commercial practice, under the policy 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.4 The debt ratio measures the proportion of debt in a company’s capital structure. Each corporation’s debt ratio target is based on industry benchmarks.5 CIC uses a Crown corporation’s debt ratio as a primary indicator of its financial health.6
Under the policy, since dividends are determined on an individual basis, Crown corporations could have different dividend rates. For commercial Crown corporations that declared dividends in 2009, dividend rates were between 65% and 90% of profits.7
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worked for the Province of Saskatchewan during a career spanning 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. As a semi-retired consultant living in Victoria, British Columbia, Sheldon continues his lifelong interest in public policy in Canada. His recent article, “Saskatchewan’s Crown Corporations— Time for a New Crown Review”, appeared in The Saskatchewan Institute of Public Policy’s Spring 2008 Policy Dialogue.