Budget 2018: Manitoba starts slaying deficit dragon
Provincial spending plan reduces red ink, but also raises total taxation
Manitoba plans to tax more, spend more and slash a third of its core deficit this year in a provincial budget that leans heavily on new fossil-fuel charges and more money from Ottawa.
In his third budget as finance minister, Cameron Friesen unveiled a $17.4-billion spending plan for the 2018-19 fiscal year that calls for a series of cuts to personal and business taxes.
Consumers and businesses, however, may not find any more money in their pockets at the end of the year.
The tax breaks, which include a hike in the basic personal tax exemption, are offset by a carbon tax that effectively raises total taxation revenue by $118 million this fiscal year.
Nonetheless, the Progressive Conservative government characterized its plan as a "tax-cut" budget.
"This is about allowing Manitobans to keep more of their hard-earned money," Friesen told reporters who received an embargoed copy of the budget on Monday, focusing solely on the tax breaks. "We're keeping our promises."
He also recommitted to one percentage point reduction in the provincial sales tax in 2020.
Spending on the rise
This year, overall spending on core government services is expected to rise $400 million, from $13.8 billion in 2017-18 to $14.2 billion in the year ending March 31, 2019.
When Crown corporations, school boards and regional health authorities are taken into account, spending rises from $17.1 billion to $17.4 billion.
The vast majority of the money will be spent on reducing the provincial deficit.
The province is expecting a $521-million pool of red ink on core government services at the end of 2018-19, a deficit reduction of $319 million.
The deficit is projected to be $639 million when the Crown corporations, schools and health authorities are taken into account, down from $779 million in 2017-18 for a drop of $140 million.
The province will accomplish this feat with the help of an additional $333 million worth of federal transfer payments.
Manitoba's total debt, however, is expected to rise $1 billion to $25 billion, thanks to interest.
The prospect of an interest-rate hike on this debt represents a major risk to the province, said University of Winnipeg economics Prof. Phil Cyrenne, explaining the wisdom of trying to whittle away at the deficit.
"We could move faster if debt service charges are our principal concern," said Friesen, explaining it was important to also offer some tax relief.
Carbon tax arrives
The single largest new taxation measure is the new $25-a-tonne carbon tax, which will be added to gasoline, diesel fuel, natural gas and propane.
That translates into an additional 5.3 cents on every litre of gas and 6.71 cents for every litre of diesel, starting on Sept. 1.
The carbon tax is expected to raise $143 million this fiscal year -- and $248 million over a 12-month period.
While Premier Brian Pallister promised to return this cash to Manitobans, the budget tells a different story. Overall taxation will rise $118 million this fiscal year.
"Some Manitobans will see their money back, but not all Manitobans," Cyrenne said, noting people who own and drive more than one vehicle are more likely to wind up in the latter category.
Friesen said it is true all Manitobans will feel the effects of the carbon tax, but he believes voters understand Ottawa has required the province to do its part to fight climate change.
This year, most of the carbon tax revenue will be used to create a $102-million "conservation trust fund" the province intends to use "to protect wetlands, forests, grasslands and natural areas."
Friesen said the fund will be managed by the Winnipeg Foundation and decisions about cash disbursements will be made by the Manitoba Habitat and Heritage Corp.
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The carbon tax won't be applied to everyone. Farmers won't be dinged for any emissions related to the items they produce. Purple gas for agriculture, commercial fishermen and miners will also be exempt.
As well, large industrial greenhouse-gas emitters, as such as the Koch fertilizer plant in Brandon and the City of Winnipeg's Brady Road Landfill, should be exempt from the $25-a-tonne carbon levy after it kicks on Sept. 1.
These emitters will face some form of charges once a system similar to a cap-and-trade scheme arrives in 2019.
Personal and business tax cuts
Anyone who receives income, however, will get some help from several hikes in the basic personal income-tax exemptions.
It will rise to $9,382 this year, saving the average taxpayer $12. It will then rise to $10,392 in 2019 and $11,402 in 2020, saving the average Manitoban an additional $109 in each of those years.
The small business tax exemption will also rise $50,000 this year, from $450,000 to $500,000. This will save businesses up to $6,000.
"We have the highest taxes west of Quebec," Friesen said, blaming the former NDP government for failing to take action to reduce the burden on taxpayers and making investments in Manitoba Hydro that are hurting ratepayers.
"We are moving money from the cabinet table to the kitchen table."
Minor increases for health and education
The budget also calls for modest spending increases to health and education, well below the rate of inflation.
Spending on health will rise 0.9 per cent to $6.16 billion, while education spending is slated to rise 0.5 per cent to $2.8 billion.
This raises the prospect of service cuts or staff reductions to both health and education.
"There's going to have to be something," Cyrenne said, but noted there's a limit to what the province can do to core services. "It's really hard for a government to take a big scalpel to them."
The province plans to build five new schools: two in Waverley West, two in northwest Winnipeg and one in southeast Brandon.
Cannabis cash uncertain
The budget also foresees a $30-million revenue hike for Manitoba Liquor & Lotteries, which is slated to distribute cannabis following its legalization later this year.
Cyrenne said it's possible cannabis-related revenues could be significant in future years, but for now, Friesen is not counting on a big stash of weed money.
There will, however, be a tax hike for roll-your-own tobacco, raising the rate from 28.5 cents per gram to 45 cents per gram. This will generate an additional $7 million for the province.
Flat funding for city, budget hole for highways
For the second straight year, the Pallister government plans to freeze its operating grant to the City of Winnipeg.
The province is also planning to reduce spending on highways by $152 million, dropping it to $350 million from $502 million last year.
Mary Agnes Welch, senior researcher for Probe Research, said she does not expect this budget to affect the PCs' popularity in a significant way.
"A budget doesn't usually move polls, unless you surprise people with a PST increase," Welch said.
"Having said that, building five schools in key battleground parts of the province doesn't hurt."
With files from Kristin Annable, Aidan Geary and Sean Kavanagh