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Economist blames red ink on recession

By: Bruce Owen

Posted: 12/24/2009 1:00 AM | Comments: 0 (including replies)

A looming provincial budget deficit of about $600 million is more a symptom of the global recession than a government that can't control its spending, a Toronto economist says.CIBC senior economist Warren Lovely said Manitoba's projected $592-million deficit for the 2009/10 budget year is in keeping with what other Canadian province's are experiencing with their pocketbooks. The province released the anticipated deficit on Tuesday in its second-quarter financial report. It's a $640-million negative adjustment to the $48-million summary surplus the province projected in the March budget.

"What Manitoba is going through is not dissimilar to what other provinces are going through in the rest of country," Lovely said. "I think it's safe to say that back in March the full extent of the weakness in the economy wasn't appreciated by anybody."

Lovely said the revenue shortfalls the Manitoba government cites are due in part to the recession in the United States, particularly with weaker industrial demand for electricity from Manitoba Hydro. Hydro's revised forecasted profit this year of $120 million is $145 million less than budgeted.

"These mid-year reports hopefully represent the worst," Lovely said, adding there are signs the economy is slowly improving. "There is reason for cautious optimism for the remaining quarters, but there is still some hard work to be done."

Besides the economy, Finance Minister Rosann Wowchuk has noted spring flooding and the campaign against the H1N1 flu hit the province's bottom line this year to the tune of $150 million. Plus, corporate income taxes are now forecast to come in $93 million lower than first predicted.

Despite the projected deficit, the government said Manitoba is still on track to average a $221-million surplus for the four-year period ending 2009-10, fulfilling its commitment under the Balanced Budget, Fiscal Management and Taxpayer Accountability Act. Under the act, budgeting is done over a four-year period and allows for a deficit to be posted in one of those years.

Critics say the deficit turn-about is more a sign of careless spending than the economy.

Opposition Progressive Conservative finance critic Rick Borotsik has said Premier Greg Selinger, who was finance minister for 10 years before taking over the premier's job in October, did not put away enough money in the fiscal stabilization fund to help offset bad budget years and also failed to pay down the province's debt.

Canadian Taxpayers Federation's Manitoba spokesman Colin Craig said the province should copy what New Brunswick is doing to right its financial ship. It placed a two-year wage freeze on public sector unions in last March's provincial budget to control expenses. Craig also said the province should freeze discretionary capital spending, such as work on the new Upper Fort Garry park on Main Street.

He said it also doesn't make sense for the province to commit $30 million towards a new polar bear exhibit at Assiniboine Park Zoo at this time, nor was it worth the estimated $35,000 it cost taxpayers to fly Selinger and other provincial officials to the recent world climate conference in Copenhagen.

bruce.owen@freepress.mb.ca

Republished from the Winnipeg Free Press print edition December 24, 2009 A11

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