Deficit expected to drop in Manitoba budget, but timing of PST cut remains uncertain

Manitoba's Progressive Conservative government is expected to unveil a spending plan on Thursday that will continue to whittle down the provincial deficit — with or without a one percentage point reduction in the provincial sales tax.

PC government to unveil 4th budget as provincial economy slows

Manitoba Finance Minister Scott Fielding and Premier Brian Pallister will unveil the PC government's fourth budget on Thursday. (Jaison Empson/CBC)

Manitoba's Progressive Conservative government is expected to unveil a spending plan Thursday afternoon that will continue to whittle down the provincial deficit — with or without a one percentage point reduction in the provincial sales tax.

The fourth budget of the Tories' first term should see the provincial deficit drop below $400 million for the 2019-20 fiscal year, as Premier Brian Pallister pledged in an interview with Bloomberg News in February.

That's lower than a $470-million deficit projected for the current fiscal year, which wraps up at the end of March.

Reducing that pool of red ink further brings the Pallister government closer to its pledge of balancing Manitoba's books during its second term in office, presuming the Tories win a second mandate in an election that — at least for now — is slated for next year.

Pallister has also pledged to shave a percentage point off the PST, a move that would cost the province about $300 million.

The premier declined to comment on the budget Wednesday. Finance Minister Scott Fielding, meanwhile, refused to  say whether the PST will be shaved down in the coming budget.

"We're absolutely committed to reducing the PST in our first term of office. That's without doubt," the rookie finance minister told reporters on Tuesday, declining to confirm whether that will happen in 2019 or 2020.

Manitoba Liberal Leader Dougald Lamont thinks the province may balance its budget, 'in part because over the last few years federal transfers have gone up by about $1 billion and our deficit used to be about $1 billion,' he said. (Ian Froese/CBC)

Manitoba Liberal Leader Dougald Lamont surmised if the PST cut doesn't happen this year, the provincial budget could be balanced.

"It's actually quite possible they'll announce it's balanced, in part because over the last few years federal transfers have gone up by about $1 billion and our deficit used to be about $1 billion," Lamont told reporters after question period on Wednesday.​

"That's one of the possibilities. They may make some announcements on the PST, but again my concern about it is that, if anything, they're going to be focused either on more cuts or what I see as more stagnation," he said, accusing the Pallister government of underspending on infrastructure.

NDP Leader Wab Kinew said he's concerned about potential cuts to health care in this year's budget, along with  measures that could make everyday life less affordable.

"Those are the things that I'll keep an eye on," he said.

Slow growth ahead

The prospect of increased federal transfers does not guarantee an easy path toward a balanced Manitoba budget. In the coming years, the provincial economy is expected to falter somewhat, starving government coffers of growth-related revenue.

In February, the Conference Board of Canada predicted Manitoba's economy will grow by 1.6 per cent this year, while the overall Canadian economy is expected to grow 1.9 per cent.

The picture gets worse in 2020.

"The province's economic growth is forecast to drop below one per cent next year as major projects contribute less to investment and planned shutdowns of several mining operations weigh on the provincial economy," the board stated in February.

Fielding says the province won't likely see a windfall from legalized cannabis sales, since costs associated with legalization are expected to outpace revenues until 2020. (Gary Solilak/CBC)

It's also unlikely the province will benefit from a legal cannabis windfall. Fielding said this week that costs associated with legalization will continue to outpace revenues from legal weed until 2020.

He would also face criticism for continuing — never mind increasing — the province's dividend from Manitoba Hydro, given the Crown corporation's own financial woes, and PC government criticism of Winnipeg's practice of siphoning a dividend away from its water and sewer utility.

The challenges on the revenue side for the province are matched by demands on the spending side, as municipalities such as the City of Winnipeg continue to press for infrastructure funds, school boards plead for education funding and the health-care system continues to serve as the province's single largest expense.

Manitoba will also be expected to dedicate funding to combat climate change and reducing greenhouse gas emissions. The Trudeau government has promised to impose a federal carbon tax on Manitoba in April. Revenue from that tax will not wind up in provincial coffers the way the province's own carbon tax would have, had it not been cancelled.

It's also unclear how the Lake Manitoba-Lake St. Martin flood channel project will appear on the provincial books.

Design work has started on the $540-million project, which involves the construction of two permanent flood-mitigation channels.

With files from Ian Froese, Sean Kavanagh and Kristin Annable