What lessons could Saskatchewan's budget hold for Manitoba?
Manitoba’s government might be looking at our neighbour’s budget for lessons — or warnings
We share a border, parks and the title of the Prairies and, sometimes, Saskatchewan and Manitoba can share political trends.
In the wake of Saskatchewan's controversial budget — filled with tax hikes and cuts to the public sector — Manitoba might be looking for lessons ... or warnings.
Saskatchewan Finance Minister Kevin Doherty tabled a deficit budget Wednesday with a projected $696-million shortfall for the 2017-18 fiscal year. There, the provincial sales tax is going up a percentage point, to six per cent from five and is being expanded to include children's clothing and restaurant meals.
- Sask. budget hikes sales tax to 6%, kills provincial bus company
- Alberta Premier Rachel Notley blasts Sask. tax hike, budget cuts
The government said it will offset some of the tax increases by reducing income taxes — personal and corporate — by a half-point on July 1, 2017 and by the same amount on July 1, 2019.
Other controversial moves included a shuttering of the 70-year-old provincial bus service, funding cuts to libraries, fee hikes for long-term care residents and slashes to post-secondary funding.
"It's a pretty tough budget in many ways," said Paul Thomas, professor emeritus of political studies at the University of Manitoba.
"The government boasts that it is trying to protect the core services — health, social services and education — but it takes a tough line."
While there are many differences with economies, deficits and political climates, Saskatchewan's budget could hold some lessons for Manitoba.
Changing the tax base
Saskatchewan Premier Brad Wall's budget showed taxation shifted from income tax to consumption taxes.
"I think Brad Wall has had a certain amount of courage." - Economics professor Gregory Mason
The previous Manitoba NDP government's drastic fall in approval could be linked to raising the sales tax in 2013, but Pallister campaigned on increasing income tax brackets by the rate of inflation and a cut to the provincial sales tax.
Gregory Mason, associate professor of economics at the University of Manitoba, said the tax base needs to change if the province wants to become competitive.
"One way of doing that from the provincial government perspective is to kind of reduce the burden of going into business and reduce the taxation, especially on new businesses," he said.
With Wall's budget moving in that direction, Mason said he thinks it will set a trend for provinces across the country, including Manitoba.
"[Pallister] offered a very moderate, tone-down, low-key approach promising not to cut core services, not to engage in layoffs, not to roll back wages and so on when he was campaigning for elections. We will see what he actually produces on April 11," Thomas added.
- Manitoba Tories release election platform
- Manitoba election: PCs promise to raise tax brackets, basic personal exemption
On Wednesday, Pallister told reporters that it's too bad Saskatchewan had a record decline in crude prices. "Clearly Premier Wall was put in a position of having to react to that."
But he said it's very different from when the former Manitoba NDP government made that change after finances gradually got out of control.
"It's not even a close comparison of course because the revenue impacts of the crude decline on both Saskatchewan … and Alberta, I would say Newfoundland in that category, too. Those provinces are extremely dependent on that revenue. When the revenue levels drop that markedly then something has to give."
Critical infrastructure spending
Saskatchewan's budget has received a lot of negative reactions for where it's not spending, but it is spending on infrastructure.
More than $3.7 billion will be invested in Saskatchewan's infrastructure.
Mason said that holds an important lesson for Manitoba's upcoming budget.
"Critical infrastructure spending is absolutely important and we should not scrimp on that," he said.
"What we do have, anyone who drives our roads knows immediately, we have a major infrastructure problem and we have to keep spending in that area."
Tough, but not 'mean-minded'
Mason added that there were tough choices that could make life for some Saskatchewan families a bit more difficult but the budget looked to find a balance which wouldn't put too much pressure on low-income people.
"You don't have to be create a competitive budget and make it a mean-minded budget," he said.
"You do need to basically figure out how your changes are going to affect people at different income levels and you need to find ways to ensure that the burden does not fall disproportionately on low-income people and that in low-income households are in fact supported."
The years of relying on resource revenue in Saskatchewan are gone, Mason said, and it was time to make tough choices.
"In a lot of ways I think Brad Wall has had a certain amount of courage in creating a budget that I think most provinces are going to start looking at seriously in the next three to four years," he said.
The key problem for Manitoba's government is to craft a budget that is strategic, without appearing to be mean, Mason added.
"It's very easy to just be Old Mother Hubbard and say the cupboard is bare and there is nothing to spend and we all get a lump of coal in our stockings, be what I call a mean-minded budget," he said.
"But if it's cast as being strategic and the whole purpose is to try and support growth, and you don't create a budget that bears really aggressively on low-income people, the rest of the stuff can be managed."
Make those tough choices now
With 10 years of leadership behind him, many of them as the province prospered and grew, Wall has recently held the spot of the country's most popular premier.
The Manitoba Progressive Conservatives won a majority government in a historic fashion last April, and Pallister was ranked the second-most popular premier, behind Wall, in a poll last September.
Although Manitoba's deficit is no longer forecast to hit over $1 billion, the government is still forecasting a summary deficit of $872 million for the fiscal year that ends in March and that means some tough, unpopular choices.
If you are going to take some tough medicine and swallow hard, you better do it early rather than late.- Politics professor Paul Thomas
If Pallister looks next door, he might see that it's better to make the unpopular choices well before the next election and take the hit in sooner, Thomas said.
"I think Pallister, if he is a shrewd politician, will say, 'How does Brad Wall do this? How does he ensure that there isn't a huge backlash against these budgetary steps that he has taken?' And Pallister has some breathing room. We are not even a year away from the last election," Thomas said.
"If you are going to take some tough medicine and swallow hard, you better do it early rather than late."
While Pallister hasn't been premier as long as Brad Wall, Mason said that if he wants to maintain Wall-like popularity he doesn't have much time to ignite growth in the province.
"If he doesn't do it this year he's going to start really worrying about re-election and he will no longer be in a position to do those strategic things," Mason said.
"So if he doesn't do it now I think he probably will miss his opportunity."
While it's not known what lessons or warnings Pallister and the PCs took from Saskatchewan's budget playing out last week, Mason said Wall's "got good political instincts if you are going to be a-right of-centre politician."