Projected deficit in Manitoba up half a billion dollars, finance minister says

The projected deficit for the current fiscal year in Manitoba has ballooned by half a billion dollars, a mid-year report from Finance Minister Adrien Sala said Monday.

The province expects to end the 2024-25 fiscal year with a $1.3-billion deficit, said the report, which is based on second-quarter financial data from the end of September.

That amounts to $513 million more red ink than Sala expected when he tabled this year's budget, which had a $796-million deficit.

The biggest driver of the increased deficit is rising health-care costs, according to the report. Sala's report blames that on "longstanding failures to deliver services within funding or anticipate financial pressures," and suggested health regions are not keeping tabs on spending.

"Over time, a breakdown of accountability between government and service delivery organizations has created an environment where overages in health spending are not only accepted but assumed unavoidable."

Manitoba has run deficits every year but two since 2009. The former Progressive Conservative government ran small surpluses twice, mainly thanks to public-sector wage freezes and high revenue at Crown corporation Manitoba Hydro.

But the Tories loosened the purse strings in their last two years in office before losing the 2023 election. The extra spending, combined with a drought-induced revenue shortfall at Manitoba Hydro and a one-time, half-billion-dollar legal settlement over child welfare payments, created a large deficit for the NDP to inherit.

As a result, the province ended the 2023-24 fiscal year with a nearly $2-billion deficit.

Gas tax holiday, pay raises strain budget

While the NDP government has promised to balance the budget by 2027, it fulfilled some election promises soon after the election that put more strain on the budget.

It temporarily suspended the provincial fuel tax, which brings in roughly $340 million a year, and reached collective agreements with public-sector workers with substantial pay raises.

The government's path to balancing the books relies on keeping annual spending growth below 2.5 per cent. Some of the collective agreements with large unions, such as nurses and civil servants, contain wage increases higher than that.

Equalization payments from the federal government have jumped by 24 per cent this year, and the province is changing property tax rebates next year in a way that will bring in an extra $148 million — the largest tax hike in revenue terms in several years.

Speaking to reporters at the Manitoba Legislative Building on Monday, Sala attempted to characterize the larger deficit projection as "good news," given the 2023-24 deficit was higher.

"There's always more work to do and continue to improve, but what we know is that this is a massive improvement over what we were left and it shows that steady progress towards our balanced budget goal in that final mandate year," said Sala, who recommitted to balancing the budget by 2027.

PC finance critic Lauren Stone (Midland) described that sentiment as doublespeak.

"They're saying on one hand they're making progress on shrinking the deficit but at the same time it's increasing by over 500 million. So this is not good news for Manitobans," Stone said via Zoom from La Salle, Man.

Bureaucracy targeted

Health Minister Uzoma Asagwara said Manitoba is trying to save costs by cutting back on Manitoba's health-care bureaucracy.

When asked why the NDP government did not consolidate some or all of the functions Manitoba Health, Manitoba Shared Health and the province's five regional health authorities — something Premier Wab Kinew once mused about doing prior to the 2023 election campaign before walking that idea back — Asagwara suggested such a move would create too much instability.

"It was really important for folks on the front lines to know that they would have a government who was coming into power who wasn't interested in creating more chaos and further destabilizing the system," Asagwara said.