Thursday, December 1 2022

Opinion

Manitoba’s Progressive Conservative government suddenly has a lot more fiscal flexibility than it thought a few months ago. The question now is: what does he intend to do with it?

Finance Minister Cameron Friesen brought good news last week, revealing that the projected deficit for 2021-22 has fallen by more than half, while this year’s deficit is expected to shrink even more.

According to the province’s public accounts for the fiscal year ending March 31, 2022, last year’s deficit — originally pegged at $1.587 billion — has shrunk to $704 million, well below what officials said. finances were waiting six months ago. Income tax and sales tax revenues were significantly higher than expected, thanks to an economy that rebounded faster than most analysts had expected.

MIKE DEAL / WINNIPEG FREE PRESS

Finance Minister Cameron Friesen brought good news last week, revealing that the projected deficit for 2021-22 has fallen by more than half, while this year’s deficit is expected to shrink even more.

The budget pot was further sweetened by a $623 million supplement from Ottawa for health care, childcare and drought relief. The province’s financial turnaround came despite Manitoba Hydro’s steep losses last year due to low water levels that negatively impacted short-term export sales.

The story of the Crown corporation (whose finances are included in the province’s bottom line) is quite different this year. High water levels and a buoyant electricity export market are expected to push Manitoba Hydro’s net revenue to $585 million in 2022-23, $465 million more than originally projected.

Along with the additional $72 million in transfers for Ottawa’s health care, the province’s deficit for 2022-23 is now expected to narrow to $202 million, well below the original forecast of $548 million. .

The good news didn’t stop there. According to Manitoba Finance’s first quarter report, provincial government debt as a percentage of the economy (one of the main indicators used by rating agencies to gauge a government’s financial health) is expected to fall below pre-pandemic levels.

The debt-to-GDP ratio is now set at 33.8% for 2022-2023, well below the 35.9% originally forecast.

The debt-to-GDP ratio is now set at 33.8% for 2022-2023, well below the 35.9% originally forecast.

Given the scale of government spending during the pandemic, the ensuing economic downturn, and gloomy forecasts that the province would be saddled with multi-billion dollar long-term deficits and unmanageable debt, the update last week’s budget was decidedly optimistic.

The question now is what will the Conservatives do with this newfound tax freedom? There is no need to accelerate the government’s plan to balance the books by 2028. The province is well ahead of schedule in this regard. Any benefit from the rush to equilibrium would be outweighed by the neglect it would cause in areas such as health care, education and child protection, where more robust public investment is desperately needed.

The Stefanson government should also resist the urge to use this recovery in financial fortunes as an impetus to cut taxes – an inclination that was a priority for the previous prime minister.

The Stefanson government should also resist the urge to use this improvement in financial fortunes as an impetus to cut taxes, an inclination that was a priority for the previous prime minister.

Instead, it should use the fiscal space it currently has to target spending in priority areas. The health care crisis, especially record-breaking emergency department wait times, should be a top priority. Increased funding in areas such as mental health, addictions and supports for low-income Manitobans should be part of a renewed fiscal plan.

More resources for municipalities, including Winnipeg — which has suffered successive years of frozen provincial funding — are badly needed, especially in transit, paramedic services and infrastructure.

After more than two years of financial hardship caused by the pandemic and the possibility of an economic downturn in 2023, now is not the time for fiscal austerity from the provincial government. It is time to make measured and responsible investments in priority areas that will yield social and economic dividends for all Manitobans.

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