The government of Manitoba tabled a $12.7-billion balanced budget Wednesday that tries to stave off economic contraction by hiking tobacco taxes and user fees to pay for $226 million in new spending.

'It's a budget that's intended to be both prudent — which is why we are not running a deficit — and stimulative, which is why we are increasing our capital spending.'—Greg Selinger

While most provinces are projecting multi-year deficits, Manitoba is forecasting a $48-million surplus for the upcoming fiscal year. But the province's accumulated debt will still climb by $861 million in 2009-10 as a result of pension obligations and increased capital investments.

So the government is taking $110 million from its $800-million fiscal stabilization fund, also known as the rainy day fund, to prevent cuts to education, health and training.

Smokers, speeders and hunters feel the pinch

A pack of cigarettes will cost 25 cents more, putting $9 million into the province's coffers, while people will also pay higher speeding fines and increased fees for hunting licences, for dropping materials at landfills and for filing documents in small-claims court. The fines and fees are expected to boost revenue by almost $3 million.

That new revenue will help pay for $1.6 billion in infrastructure projects, including housing, hospitals, highways, schools and water treatment plants. The goal is to create about 10,000 jobs and stimulate the economy.

The province is also pouring $53 million more into public schools and increasing operating grants for colleges and universities by six per cent.

Finance Minister Greg Selinger has said getting more people educated and trained will help Manitoba deal with the economic slowdown. These are "tough times" and Manitoba is not immune to the global recession, he said.

"It's a budget that's intended to be both prudent — which is why we are not running a deficit — and stimulative, which is why we are increasing our capital spending," Selinger said.

"Revenues are flattening out. We have to make sure that we're careful as we go forward to have revenues to support key programs."

No park fees for next two years

On the plus side for taxpayers, the government is boosting its education property tax credit by $50 and boosting the farmland school tax credit from 70 per cent to 75 per cent. The province is also eliminating entrance fees at provincial parks for the next two years.

"We think folks are going to still want to recreate, and we would rather they recreate in Manitoba," Selinger said. "All of those dollars that they circulate while they recreate will turn over more quickly in Manitoba and help our own domestic economy."

Manitoba will also completely phase out the small-business tax by the end of next year, he said.

The NDP government has boasted that the province is weathering the economic storm well, with one of the lowest rates of unemployment in the country and "steady-as-she-goes" growth.

But Selinger's forecasts are for the economy to shrink 0.2 per cent in fiscal 2009-10, causing an expected $50-million hit to revenues. That means the government will have to slow down its debt repayment by amending its legal obligations in Manitoba's balanced-budget legislation, Selinger said.

"Most jurisdictions in Canada will fund stimulus through deficit this year," he said. "In Manitoba, our stimulus will be partially funded through reducing debt repayments within the balanced-budget legislation."

Still, the province says Manitoba will fare better than other provinces because there is still plenty of work to keep its diverse manufacturers busy.

As it boosts apprenticeship training programs, the province is also increasing loans for companies. "We're all committed to stimulating the economy during a period of recession," Selinger said. "We're doing it in a prudent way."

The province is increasing the speed limit on some sections of Manitoba highways to 110 kilometres an hour. But at the same time, speeding fines will increase by up to $171 for the most serious infractions. That is expected to generate $3.7 million more, which the province says will be diverted to police, courts and prosecutors.

Mixed reviews

The president of Manitoba's business council called Wednesday's budget a relatively good one for industry. But Jim Carr said he thinks the government could have used the occasion to begin phasing out what he called irritating payroll taxes.

'We're all committed to stimulating the economy during a period of recession. We're doing it in a prudent way.'—Greg Selinger

However, said he's hopeful that still may happen.

"There's a line or two [in the budget document] that says that Mr. Selinger is prepared to talk to people about other ways of collecting tax that would put aside this irritant that charges business on the workforce," he said, adding that he is happy to see the province triple the amount of available loans to qualified businesses.

Liberal Leader John Gerrard called the budget a "smoke and mirrors exercise." He said the government is using the rainy day fund and Manitoba Hydro profits to hide the province's real economic picture.

The NDP should have done more to lower wait times for education programs, Gerrard said.

He also wanted a new way of funding health care — one that would have sent money directly to front-line improvements instead of to management.

The current system is top-heavy, with regional health authorities receiving the money and deciding how it should be spent, Gerrard said. By the time the funds reach the patient level, a good chunk has been lost in administration, he said.

Progressive Conservative Leader Hugh McFadyen said he's worried the budget will drive the province deeper into debt by taking $110 million from the rainy day fund.

Anti-poverty groups such as Winnipeg Harvest said the economic downturn is causing job losses, and the budget offers no increase in welfare rates.

The Canadian Federation of Independent Business, meanwhile, said the budget puts Manitoba further back of Saskatchewan in terms of tax competitiveness. Spokesman Shannon Martin said Saskatchewan has been chopping away at income taxes, but the Manitoba budget only rehashes small cuts announced last year.

With files from the Canadian Press