2025 Manitoba budget forecasts deficit as high as $1.9B if tariffs continue

Manitoba is forecasting a deficit that could range from around $800 million to as high as $1.9 billion, as the uncertainty of ongoing tariff wars clouds the province's economic future, according to the NDP government's latest spending plan.

The second budget from Premier Wab Kinew's government, released Thursday, forecasts that a continuing 25 per cent tariff on U.S. imports, along with retaliation from the Canadian government, could drag down economic activity and reduce incomes in Manitoba by $1,420 on a per capita basis.

The province says it's prepared to spend up to half a billion dollars to support tariff-affected businesses and workers, while also launching a range of new major infrastructure projects, including schools and hospital emergency departments, to cushion what the budget says could be an economic hit comparable to the recession Manitoba saw in 2009.

Finance Minister Adrien Sala asserted Manitoba is as ready as possible for any economic turbulence.

"We're starting from a place of strength," he said during a briefing with reporters at the legislature Thursday, calling the budget one that "meets the moment" Manitoba is facing.

If current trade tensions with both the U.S. and China recede, the forecast deficit will be $794 million, but even that target is based on the assumption Manitoba will rake in more revenues than ever before.

University of Winnipeg economist Philippe Cyrenne says it's unrealistic to expect provincial sales tax and income tax revenues to significantly rise during turbulent economic times.

"Would you take this document to a bank and try to get a loan? I think it would be difficult," Cyrenne said.

He said it's clear much of the budget was prepared before tariff threats materialized.

"This looks like it was put together a month ago," he said.

"Trying to put together a budget in these times is very challenging."

Sala maintained Thursday the government will still achieve a balanced budget by 2027. Achieving that goal in its first term was one of the NDP's promises during the 2023 election campaign.

However, the Opposition Progressive Conservatives say that target is becoming lofty.

"They're certainly putting a lot of faith in a lot of federal transfers coming this year," said finance critic Lauren Stone, noting the province is forecasting an $639 million increase in transfers from Ottawa.

"Last year we saw them post an $800-million deficit [estimate] and then balloon it to $1.3 billion," she said. "Clearly this government has a tax-and-spend problem."

Tariff contingencies

Even in a scenario where the tariffs stop, the province's $25.9-billion budget forecasts $1.7 billion in increased spending across the board — a seven per cent increase over the last budget. 

If the tariffs do continue, the budget includes $500 million for a "tariff response contingency," along with $600 million for a "revenue contingency" — which together would drive the deficit to $1.9 billion, the province says.

The $500 million for tariff response contingency includes $100 million to help businesses find new markets and $100 million for loans, along with $100 million for the agriculture sector and $100 million in case the demand for government programs and other supports grows.

"We are very pleased to see that the province has made some consideration should those tariffs be enacted," said Terry Shaw, a regional vice-president with Canadian Manufacturers and Exporters.

There's also $50 million to help post-secondary institutions retrain workers, $25 million toward increased student loans and $10 million in student aid grants. 

Manitoba's total debt is $36.6 billion, up $1.4 billion from the previous year, according to the budget.

Boosting infrastructure spending

As for other spending, the health department will get an increase of almost $1.2 billion this fiscal year, for a total of nearly $9.4 billion.

New initiatives include 97 new hospital beds provincewide and three new primary care clinics with extended hours.

There's a pledge to hire hundreds of new health-care workers, with a focus on allied health professionals and staff in rural and northern communities, the budget says.

The 2025-26 spending plan also prioritizes building new infrastructure in a push to create jobs, Sala said.

The province is vowing to build 11 new schools in the next three years, along with beginning construction this year on a new emergency department and a mature women's centre at Victoria Hospital in Winnipeg, and a new ER in Eriksdale.

Construction will start this fiscal year on four of the schools: one in Brandon's southwest quadrant, as well as previously announced builds in Devonshire Drive West and Prairie Pointe in Winnipeg, along with one in West St. Paul. 

New schools are planned in future years in Winnipeg's Bridgwater Lakes, Highland Pointe and northwest quadrant, along with a French-language school in St. Boniface. Outside the provincial capital, there are plans for a new French-language school in Brandon and a new school in Neepawa.

The government is pledging to start construction on a new personal care home in Arborg, in addition to previously announced facilities in Lac du Bonnet and Winnipeg's Transcona neighbourhood.

As well, construction will start this year on a health-care centre of excellence, planned for the Portage Place redevelopment in downtown Winnipeg.

The province is also committing $73.4 million to its strategy, announced late last year, for moving people living in tent encampments into more permanent housing.

The funding includes $25 million to open a navigation centre where outreach staff can connect with people living in encampments, as well as $16 million to renovate a downtown Winnipeg building to provide transitional housing for 118 people.

Business supports

Thursday's budget pledges to reduce payroll taxes for businesses. Beginning next January, the threshold at which businesses pay the tax will rise to $2.5 million, up from the current $2.25 million. The threshold for the second, higher rate will rise to $5 million from $4.5 million. The government says 875 businesses will be better off.

Businesses can also apply for a new security rebate program that offers up to $2,500 per company. 

The previous rebate program, which offered a maximum $300 rebate to businesses and homeowners and was quickly oversubscribed, will return for homeowners exclusively, but only an additional $2 million will be provided.

Manitoba will expand its free prescription birth control program by extending coverage to Plan B, commonly known as the morning-after pill, and copper IUDs, the budget states.

In other tariff countermeasures, the government will end its contract with a U.S. firm that provided online purchasing options for provincial park passes. The province will make park entry free of charge this year.

As well, Teslas and electric vehicles manufactured in China will no longer be eligible for the province's EV rebate program, Sala said.

Municipalities are in for a financial boost, as the government will give them four per cent of gas tax revenues. That would amount to around $13.6 million, based on the last full year in which Manitoba charged the gas tax. 

Winnipeg Mayor Scott Gillingham repeated that he wants a new funding formula with the province.

But "I do acknowledge, and I am grateful, that it's not a freeze — it's an incremental bump," he told reporters after the budget was released.

Education tax rebate going up

Homeowners will see a boost to the education property tax rebate, with the maximum rebate increasing by $100 next year to $1,600.

No changes are planned to the NDP's rebate scheme this year, which reduces or entirely eliminates the tax for some homeowners, but sees the owners of higher-valued homes paying more than they would have under the former Progressive Conservative government's 50 per cent rebate on education taxes. 

The province expects to bring in an additional $182 million in education property taxes this year, which is the first year under the overhaul of the system.

The government previously vowed to help small businesses with their education property taxes, but this year's budget is silent on that. The 50 per cent rebate for commercial properties was phased out this year.

The Canadian Taxpayers Federation, meanwhile, is frustrated by another tax change, after the government said beginning with the 2025 tax year, it will put a freeze on indexing personal income tax brackets to the rate of inflation.

That means inflation will push more people into higher tax brackets, and result in a higher proportion of people's income becoming taxable.

"It's terrible, because it's a stealth tax hike," said Gage Haubrich, Prairie director of the taxpayers' organization.

"It's punishing Manitobans for getting a cost-of-living pay raise."

The budget also teases a prospective tax change in the future.

It says government is considering legislation to prevent people from avoiding the land transfer tax by separating the legal and beneficial ownership of property, which is a legal process. Manitoba is evaluating the change "with a view to improving tax fairness," budget documents say.