Manitoba budget focuses on COVID-19 recovery, continues aggressive push to cut deficit

Manitoba's latest provincial budget continues the Progressive Conservative government's efforts to claw out of the fiscal hole created by the COVID-19 pandemic, while trying to address ongoing pressures on the health system and the economy.

The government's 2022-23 spending plan, announced Tuesday, slashes the deficit by more than $1 billion compared to last year, while forging ahead with an aggressive push to reduce taxes, including a plan to eventually eliminate the education property tax.

Spending increases for most departments are moderate.

Speaking to reporters before presenting the budget at the legislature, Finance Minister Cameron Friesen was asked why the province is pursuing its efforts to cut taxes, even as the province faces pressure from the pandemic, inflation and global uncertainty caused by Russia's invasion of Ukraine.

"Governments and finance ministers are all about balancing priorities," he said.

"We simply think that it's not right to make Manitobans wait.... They need affordability now."

Total spending in this year's budget is set to rise to $19.9 billion, from $19.4 billion last year. Revenues are expected to increase to $19.4 billion, up from $17.8 billion in the 2021-22 budget.

The Department of Health's budget increases by $105 million, or 1.6 per cent, which the province attributes in part to a wage settlement with the Manitoba Nurses. The budget also allocates $54 million for the newly created Department of Seniors and Long-Term Care.

The budget includes $110 million allocated to address the surgical and diagnostic backlog, up from $50 million in last year's budget.

It also puts $9 million toward increasing capacity in Manitoba's intensive care units. That will add 28 ICU beds to the province's current baseline capacity, which is 72.

As well, it includes more than $100 million for redeveloping the emergency room at St. Boniface Hospital, tripling its size.

The budget also includes a moderate boost for education funding, introduces an expanded tax credit program for residential renters, and commits a total of $18 million to index Rent Assist payments to inflation.

It also includes $630 million for the province's ongoing COVID-19 response, and other contingencies, such as the war in Ukraine.

'Kinder and gentler' budget

The province projects a budget shortfall of $548 million for 2022-23, down from the $1.6 billion deficit projected in the 2021-22 budget.

Despite that dramatic decrease, the province's fiscal outlook estimates it could still take years to balance the budget. Friesen told reporters the province is on track to eliminate its deficit within seven years.

Under the most optimistic scenario in the fiscal outlook, however, the province forecasts it could eliminate the deficit within the coming year.

Christopher Adams, adjunct professor of political studies at the University of Manitoba, described this year's budget as a "kinder and gentler" one compared to those under former premier Brian Pallister.

It attempts to appeal to people concerned about debt and taxes, while also addressing concerns about affordability, ahead of a provincial election set for next year, Adams said.

"I think the government is hitting on a number of notes to shore up their support among middle-class voters and that's something they have to do if they're going to survive in 2023."

Housing affordability

The Progressive Conservatives promised during the 2019 provincial election campaign to gradually eliminate school taxes from property tax bills, which they initially projected would take 10 years.

Tuesday's budget says the education property tax rebate will rise from 25 per cent to 37.5 per cent this year, and again to 50 per cent in 2023.

Owners of residential and farming properties will see their rebate increase on average from $371 in 2021 to $581 in 2022, and then to $774 in 2023, according to the province.

Commercial property owners will continue to receive a 10 per cent rebate.

Renters previously received a 20 per cent credit on annual rent paid, up to a maximum of $525 per year, as part of the education property tax rebate.

They will now be covered under a new program for residential renters.

Previously, the tax credit for renters was based on 20 per cent of rent paid for the year, up to the $525 maximum. Now, the rebate will be based on a fixed monthly amount — but still limited to the $525 ceiling.

The rental rebate program will, though, expand to include people receiving Rent Assist and not enrolled in Employment and Income Assistance, as well as people living in social housing, adding up to 45,000 households to those who qualify for the credit.

Rising revenues

This is the current Progressive Conservative government's seventh budget, and its first under the leadership of Premier Heather Stefanson.

When questioned about her government's plan to offer an education tax rebate while also raising spending amid the continuing pandemic and global uncertainty, Stefanson said the government can "walk and chew gum at the same time."

"We can make those significant investments in health care to tackle those diagnostic and surgical backlogs, as well as providing money to put back into the pockets of Manitobans," she said, speaking to reporters after Friesen tabled the budget in the legislature.

Notably, Adams said the budget does not contain any significant increases to fees or taxes.

The expected increase in revenues is driven mainly by growth in the economy, as well as a $610 million, or 10.8 per cent, increase in federal transfers.

Real gross domestic product (GDP) is projected to grow 3.6 per cent in 2022, and by 2.8 per cent in 2023.

Net debt-to-GDP is expected to fall to 35.9 per cent, from 39.9 per cent in the 2021-22 budget.

NDP Leader Wab Kinew said Stefanson's first budget as premier was a continuation of the policies of her predecessor.

"Given everything that's going on right now — with Ukraine, with the cost of living, with COVID — Manitobans are looking for reasons to be optimistic," the Official Opposition leader said.

"They're looking for reasons for hope. But unfortunately they're not going to find it in this budget today."

The province's plan lacks details on how it will grow the province's economy, Kinew said, adding that any such plan must include helping communities in Manitoba's north, as well as booming areas in the south.

It also did not provide any timelines for when the province planned to clear the surgical and diagnostic backlog.

New spending and fees cut

The budget also includes a $5 million fund for initiatives aimed at advancing reconciliation with Indigenous peoples and communities. The budget document says money from that fund can be used to support a wide range of activities related to reconciliation, including initiatives to address harms caused by the residential school system and those strengthening Indigenous cultures and languages.

Last year, the province announced $50 million for a new venture capital fund. This year, those funds will become available, although Friesen would not specify when.

The province plans to reduce annual registration fees for most non-commercial vehicles by $10, following two similar cuts in recent years.

As well, some companies will become exempt from the provincial payroll tax after the province increases the threshold from from $1.75 million to $2 million in total remuneration.