The Selinger government is backing off a 2011 election campaign promise, reaffirmed in last year's budget, to eliminate the school tax for seniors ages 65 and over by 2015.
Finance Minister Jennifer Howard said the government will need an additional year to phase in the tax credit because it's under the gun not only to eliminate the deficit in three years, but to deal with lower-than-anticipated federal transfer payments due to an ongoing squabble with Ottawa over how many people actually live in Manitoba.
The first instalment of the new seniors' property tax credit will come into effect in the March 6 budget, but Howard said it will take two more budgets to completely implement instead of one.
"That is directly related to having less revenue and still wanting to move towards balancing the budget," she said Friday.
The tax credit comes with a hefty price tag at the same time the Selinger government wants to wipe out the deficit by 2017.
Howard said by phasing it in over three years instead of two, the blow will not be as severe.
"This year, we expect this to be worth about $15 million. If we try to do it in two years it would have been worth about $25 million. That $10 million helps ensure we can fund education."
In 2012, the NDP gave a $75 property tax credit for seniors earning less than $25,000 on top of the $700 credit given to all Manitoba households. There is an additional $400 credit for households with an annual income less than $40,000.
Howard said those credits mean there are about 990 seniors who don't pay any education tax now. There are more than 180,000 seniors in the province, but it's not known how many live in their own homes.
Howard said besides delaying the full tax credit, the NDP is wrestling with how to make it fair for all seniors, whether they live in a home in Tuxedo or a home in Point Douglas.
"We are looking at the very real question if it's fair that the provincial government forks over $10,000 to $20,000 for people who live in very expensive homes, which I think is a small, small minority of seniors," Howard said.
"Do you want to be writing a cheque for $10,000, $15,000, $20,000 to pay the education property taxes on a $1-million home? I think that's something that many Manitobans would say, 'No, that's maybe not fair.' "
Howard also said talks between Manitoba and Statistics Canada continue on Manitoba's contention the federal agency underestimated the province's population by as many as 18,000 people in the 2011 census.
The Manitoba government argues the province stands to lose $500 million in federal transfer payments over the next five years because of the discrepancy and is considering an independent analysis to settle the issue.
"The impact of it is serious for our budget," she said. "We continue to look for ways to adjust to a revenue that's $100 million less than we expected."
The province says Statistics Canada had stated Manitoba's 2011 population estimate at 1,251,690, but reduced it to 1,233,728, a reduction the province says is not consistent with the number of people filing income tax returns over the same period.
Statistics Canada has said its numbers are correct.
Howard said the transfer shortfall is significant despite Manitoba's economy, which although still recovering from the 2009 recession, is doing well, with the province's GDP growth second only to Alberta's and almost on par with Saskatchewan's.
"But what is giving us real difficulty on the revenue side is the fact that we have a growing population, and federal transfers don't consider that."
The Opposition Progressive Conservatives have said the dispute with Statistics Canada has more to do with the provincial government spending beyond its means.
The Tories say the year-end results for 2012-13 showed the government went $186 million over its original core deficit projection of $504 million because of its spending.