Manitobans will have to pay more on many of their purchases beginning July 1.
Provincial officials released their 2013 budget on Tuesday, showing their plans to increase the PST to eight per cent from from seven per cent.
Finance Minister Stan Struthers said the money raised from the tax hike will go entirely to infrastructure spending — on everything from repairing and renewing roads, improving flood prevention infrastructure and increasing capital investments like hospitals and hockey rinks.
"Our approach is that all three levels of government need to work together to fill the infrastructure gap that is out there," said Struthers.
Struthers said he will change the Balanced Budget Legislation that would require the NDP government to hold a referendum before increasing the PST. He added the province needed to move quickly to improve flood prevention infrastructure.
"Part of moving quickly means we have to get started right away," he said. "Budget 2013 means we can start right away."
Manitoba Finance Minister Stan Struthers says the province is facing a third major flood in five years.
Infrastructure spending will go to address a number of flood prevention measures, including water-storage projects, drainage licensing and major construction projects, he said.
The funding will begin immediately, Struthers said.
"We’ve been through this before. We know how devastating another flood could be," he said.
Provincial officials estimate the increase will raise about $277 million for provincial coffers by the next budget — part of a total $1.8-billion investment in infrastructure planned for the year. Officials said that would mean about $300 per year for the average household.
Struthers said the tax hike was necessary to take advantage of the federal government’s Building Canada Plan, which offers infrastructure funding to provinces but only if they match it first. Struthers said they will take advantage of every available dollar in the fund until it expires in 10 years.
That’s when the one per cent increase will be reversed, according to provincial officials.
Previously, one per cent of the province’s PST went directly to infrastructure. Under the new plan, two per cent will now be allocated.
On the list for 2013 improvements are portions of Highway 10 between Brandon and Minnedosa, the Trans-Canada Highway between Portage la Prairie and Highway 16, and the interchange of the Trans-Canada at the east Perimeter.
Also on the list are improvements to Brandon’s Keystone Centre, a tourism plan for Hollow Water First Nation and upgrades to a number of northern airports.
Peguis First Nation will get a new recreational multiplex and Selkirk Mental Health Hospital will see funds for upgrades this year.
Books balanced by 2017, officials say
Provincial officials said a number of small cuts to departments and small increases in fees and taxes for Manitobans will help them balance the books by 2017.
"This is a real NDP budget," said Michael Benarroch, the dean of the University of Manitoba’s Asper School of Business.
"Spending is primarily focused on lower income Manitobans … and it’s not as much of a cut in spending as I anticipated."
Fewer spending cuts translated to more tax hikes in the budget.
In addition to raising revenue from the PST hike, the province hoped to get more money from Manitoba’s banks. The Corporation Capital Tax on Financial Institutions is going up to five per cent from four per cent. The hike will only apply to commercial banks, so credit unions will be exempt.
"If they pass that on to consumers it’ll mean more fees," said Benarroch.
The move comes as part of an attempt to mitigate the province’s deficit of more than $500 million.
Rainy day fund declines
The province will take $100 million out of its rainy day fund for the 2013 budget, leaving it at $275 million. The fund has been steadily decreasing since 2008, when it sat at $864 million.
Manitoba’s deficit, not including debt from its crown corporations, is forecast to be $518 million for 2013/14.
The latest budget calls for the province’s expenditures to increase by about three per cent, primarily due to spending on health care.
Officials maintained much of their health and education spending and avoided making cuts in those areas. In total, 10 departments saw their budgets frozen or reduced to save money.
That’s down from $583 million in 2012/13. Forecasters had initially predicted the deficit for 2012/13 would be $460 million.
Minimum wage up, income tax down
Manitobans earning minimum wage will see extra money on their paycheques this fall.
Minimum wage is set to increase from $10.25 per hour to $10.45 on Oct. 1. In addition, the provincial income tax exemption is going up by $250 a person, which will translate to about $27 per person per year.
Seniors to be exempt from school tax
Before the budget was released Tuesday, officials announced they would phase out the education tax portion of municipal taxes for Manitobans over age 65.
Struthers said seniors in Manitoba would no longer pay school tax on their principal residence by 2015.
The province also said it is building hundreds more affordable housing units over and above their existing commitments but did not say exactly how many.
They’ve also provided a tax credit to those who build rental properties in Manitoba.
In March, Manitoba’s Tories called for an increase to the rental allowance for those on social assistance in the province.
Instead, Struthers announced that benefits under RentAid, a program that helps low-income renters, will increase by $240 a year.
Universities getting less than expected
The province said post-secondary institutions could expect a 2.5 per cent increase in funding in this budget, half of what institutions were promised by the province in past budgets.
"We do know universities have been doing an aggressive lobbying to ensure their numbers are up," Christopher Adams, a political scientist with the University of Manitoba.
But Adams said the funding provided is comparable to what other provinces are doing.
"It could’ve been much less," said Adams.
Over the last three years, funding to universities has increased by about 12.5 per cent.
In addition, students who want to take distance education courses will have to pay more.
Distance-learning course fees will go up by $15 per half credit. Students will also pay $10 more for materials. Those increases are expected to raise about $50,000 for the government.
But, the provincial government will be investing in a new online site that links skilled Manitobans with employers. They’re currently working with WANTED Technologies to develop the site.
Taxes hiked in cigarettes, nixed on baby needs
The province also announced a number of small measures to raise revenue for the province — including a range of user fee increases and taxes.
Smoking will cost you more starting Tuesday at midnight. Each cigarette will cost about four cents more, or about $1 per pack. The price is going up from 25 cents a cigarette to 29 cents.
The province also announced it will cost Manitobans more to fish — they’re increasing the cost of a license by $5.
If your car gets towed and ends up in the impound lot, you’ll have to pay $20 more to get it out. The new total fee will be $135. The province expects to raise $218,000 from that measure.
Registering businesses will also cost more. Registration fees will increase anywhere from $5 to $50 according to the budget, with the aim of raising about $434,000.
While anglers, entrepreneurs and smokers will feel the pinch, new parents will save a few bucks.
The PST will no longer be applied to baby supplies such as diapers, car seats and strollers.