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Long-term plan for budget panned

Moody's drops province's debt rating

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Manitoba's plan to get the budget in the black under Premier Greg Selinger was not received positively.

CHRIS YOUNG / THE CANADIAN PRESS FILES Enlarge Image

Manitoba's plan to get the budget in the black under Premier Greg Selinger was not received positively.

It's not so much a spanking as a severe scolding.

Moody's Investors Service reprimanded the Selinger government Monday on its plan to bring the province's books back into the black by 2016-17 without showing any meaningful signs it was reining in its spending. The independent credit-rating agency downgraded the outlook for Manitoba's Aa1 debt rating to negative from stable.

The immediate impact is it will cost the province a bit more to borrow money, Finance Minister Jennifer Howard said, something it can handle because of budgetary wiggle room.

She said Moody's downgrading meant a less than a half a per cent increase to the province's debt-serving costs.

"For me, it means a renewed focus on things like efficient spending and good use of taxpayer dollars," Howard said. "I think for most Manitoba families, they aren't going see a difference in how they live tomorrow versus yesterday because of this news.

'it means a renewed focus on things like efficient spending and good use of taxpayer dollars'

-- Finance Minister Jennifer Howard

"We've managed to bring down the cost of borrowing and if this increases it, I think it can be accommodated within what we've planned to spend."

Howard also said despite Moody's skepticism, the government remains committed -- without raising taxes -- to balancing the budget by 2016-17. The summary deficit is forecast to shrink to $357 million, down from an estimated shortfall of $432 million for the 2013-14 fiscal year.

"Expenditure pressure and prospects for modest GDP growth will make it challenging for the province to achieve its target of a return to a modest surplus and stabilizing debt burden by 2016-17," Moody's lead analyst for Manitoba, Kathrin Heitmann, said in a release.

Moody's also said while Manitoba's deficit is small as a percentage of revenue, its pledge to return to surplus relies on the province's ability to contain spending. About 70 per cent of spending is in health care and social services.

Howard said the province is on track to manage its spending.

"It is challenging," she said. "(But) we know that we live in a province where we can have massive changes because of flooding or forest fires or other things that happen, and no Manitobans expect us to say 'No' to fighting the flood or protecting their homes because we have a date that we want to balance the budget."

Canadian Taxpayers Federation Prairie director Colin Craig said the next step for Moody's is to lower the province's credit rating, which would likely happen sometime after the next budget is delivered next spring.

"It's not a good sign, but it's not surprising," Craig said. "They haven't been able to suddenly turn into a fiscally responsible government, so things have caught up with them."

Moody's also said from now to 2017-18, government revenues were forecast to grow on average by 3.3 per cent per year, including the impact of federal transfers, while expenditures were expected to grow by only 1.9 per cent during the same period.

The international credit-rating service also said Manitoba's debt burden was expected to reach about 150 per cent of revenues in 2016-17, versus 141 per cent expected for 2013-14 and 101 per cent recorded in 2008-09.

"This trend in debt metrics represents a risk to the province's creditworthiness and leaves limited headroom for substantial further deterioration beyond current expectations," Moody's said.

At the same time, Moody's affirmed the province's Aa1 senior unsecured rating.

It said the Aa1 rating reflected the diversity and stability of Manitoba's economy, which is expected to grow at a modest pace in line with the Canadian average in the next few years -- which produces low unemployment -- and the province's high degree of financial flexibility due to its access to a broad and stable tax base.

The agency said Manitoba's rating could change if Moody's sees a loss of "fiscal discipline" leading to a continued and sustained increase in debt.

The government said the Aa1 credit rating is fourth best among the provinces and two steps above what it was when the opposition Progressive Conservatives left office in 1999.

bruce.owen@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 19, 2014 A4

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