'Fiscal mess': Manitoba’s deficit grows to $1.6 billion

Manitoba’s forecasted deficit has reached more than $1.6 billion.

This news comes as part of the province’s 2023-24 second-quarter report, with Premier Wab Kinew and Finance Minister Adrien Sala saying that the deficit is much larger than what was shared in the 2023 budget.

According to the government, the forecasted deficit of $1.6 billion is up significantly from the $363 million deficit that was reported in the budget and the government’s first-quarter report in July.

This means that in six months, the province’s deficit increased by more than $1.2 billion.

Kinew said it’s going to take a lot of hard work to restore a sustainable path for Manitoba’s finances, and described the deficit as “eye-popping.”

“This is one of the worst deficits that our province has ever seen in non-pandemic times,” Kinew said at a news conference on Tuesday.

“You should have heard about this before you cast your ballots this year. Our team is hard at work to restore a path to fiscal balance here in the province, while making good on our election commitments around health-care and lowering costs for your family.”

The province said several factors contributed to the deficit, including the fact that the previous government didn’t account for the fiscal reality of Manitoba Hydro’s revenues; made capital promises that weren’t approved; and didn’t account for inflation and health-care bargaining.

“If you add all these things together, it’s very clear now that budget 2023 and the PC government’s overall fiscal plan was nothing more than wishful thinking,” the premier said.

“There were numerous flawed assumptions. There were areas where there was not adequate planning or budgeting being followed. In short, that has left our province with a significant fiscal mess.”

Former premier Heather Stefanson says the NDP’s conclusions are false and that everything was accounted for,

“Manitobans don’t need to be scared about this,” she said. “This is nothing more than the NDP playing politics.”

Financial author Evelyn Jacks calls the deficit staggering and says it could lead to higher debt-servicing costs, which could leave the government with tough choices around taxes and social services.

“Someone has to pay for that deficit, and remember, governments too are in a higher interest rate environment,” Jacks said.

A third-party audit of the previous government’s spending is underway.

The 2024-25 pre-budget consultations will begin in January.

DEFICIT CONCERNS

In a statement, the Canadian Taxpayers Federation (CTF) said the Manitoba government needs to get the deficit under control.

“It doesn’t matter that Premier Wab Kinew inherited this mess, it’s now his job to fix it,” said Gage Haubrich, CTF Prairie director.

“Kinew is in charge now and it’s up to his government to get spending down and balance the budget, so no more money is wasted on debt interest charges.”

According to the CTF, government revenue is down $719 million; income tax revenue has decreased by $264 million; and income from Manitoba Hydro is down by $610 million. However, the federation noted that spending is up compared to the budget, in part, because of higher than budgeted salaries and benefits.

The CTF said that the government debt is now projected to grow to $33 billion by the end of the year – an increase of $2 billion compared to the budget. It added that interest charges on this debt will cost taxpayers $2.2 billion a year.

“Kinew needs to look for places to get spending down and bloated government salaries are a good place to start,” Haubrich said.

“The government shouldn’t be borrowing money on the backs of future Manitobans to fund six-figure salaries for bureaucrats.”

At Tuesday’s news conference, the premier said the province is committed to fixing the situation and balancing the budget over their first term, while still delivering in areas like health-care and lowering costs.

“$1.6 billion in a current year deficit is a significant hole for us to climb out of collectively, but I do just want to send a message of reassurance to the people of Manitoba that we are hard at work at fixing this current situation,” he said.