Winnipeg Free Press - PRINT EDITION

Weather sets the course for Manitoba's budget

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When the province tables the 2013-14 budget April 16, you can expect Finance Minister Stan Struthers to have one eye on the text of his budget speech and the other on the weather.

During the next month, the daily high-temperature and precipitation forecasts will have just as much of an effect on his budget plan for the upcoming year as economic growth and interest rates. Perhaps more.

This was the painful lesson learned from the 2011 flood, one of the largest and certainly the most expensive in Manitoba history. At last count, the 2011 flood will cost more than $1.1 billion. The final cost will not be known for several more years, but bet that the final tab will be higher.

It would be an understatement to describe the flood as a seismic event for the province's finances. Manitoba finished the 2011-12 fiscal year with a record $999-million deficit. This included net flood costs of $437 million.

Could Struthers and the NDP government, already having trouble finding traction in their fight with the growing budget deficit, absorb another 10-figure flood? Unlikely, at least not without dramatic cuts to core services or hikes in major taxes, two options he and his government have so far resisted.

The past three budgets have been an exercise in delayed gratification for Manitoba's NDP government. Unwilling to make deep cuts to spending, jobs or programs, the province has been waiting for the economy to rebound and restore revenues. In other words, it is hoping to grow out of this mess.

Unfortunately, the chances of that happening are pretty remote. Last year, most governments in this country cut spending and still saw their deficits increase as the economy underperformed. That trend is expected to continue for at least a few more years.

In this context, the weather during the next month, and the federal government's Disaster Financial Assistance (DFA) program, will in large part determine Manitoba's fiscal fortunes.

According to federal guidelines, DFA is meant to "assist provinces with the costs of dealing with a disaster where those costs would otherwise place a significant burden on the provincial economy and would exceed what they might reasonably be expected to fully bear on their own."

DFA helps pay for damage done to property, both public and private, public works along with some mitigation efforts prior to flooding, and some of the cleanup afterwards. However, many flood-related expenses are not covered.

Pre-flood mitigation or protection is not eligible under DFA. Compensation for cottagers, for example, is not cost-shareable. Nor are lost livestock or damaged pasture land. Emergency dike construction and removal are eligible for DFA help. However, converting a temporary dike into a permanent one is not eligible for cost-sharing.

In general, it's not an exaggeration to say that as the costs of fighting natural disasters have risen, the scope of federal assistance has been pared back. In 1997, the total cost of the Flood of the Century and compensating property owners came in at $254 million. Of that total, Ottawa through DFA eventually covered $193 million, or about 78 per cent of total costs.

However, the feds also provided $24 million under something called the Jobs and Economic Restoration Initiative (JERI), a one-time program to replace income lost during the flood. The feds also covered part of the costs of community ring dikes and individual property flood protection.

When you add it up, federal support was closer to 85 per cent of total flood-related expenses, both during and after the 1997 disaster.

In 1998, however, the then-Liberal government tightened the rules for DFA claims excluding any future claims for income loss. The provinces have not been very happy with that development. In fact, to this day, Quebec is trying to get $421 million in additional compensation for income loss from the 1998 ice storm.

It's tough to accuse Ottawa of being unsympathetic to Manitoba's plight when it will, when all the bills are submitted, contribute nearly $500 million to cover the total cost of the 2011 flood. And yet, as the cost of particularly severe disasters go up, it's fair to conclude the program is falling short of its stated intention.

That analysis will not spare the NDP government in Manitoba from criticism. The Opposition Tories have little sympathy for the NDP predicament, portraying the flood as a negligible factor in the province's growing deficit. Mild austerity measures introduced in last year's budget, along with some modest economic growth, might have allowed the NDP to report some progress in the upcoming provincial budget. That seems like a long shot now.

Governments should not have to base future fiscal policy on weather forecasts, but that's exactly where Struthers and the NDP find themselves now.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition March 27, 2013 A4

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