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Flood swamps ability to be fierce deficit-slayer

Howard now focuses on just hitting target

Posted: 07/29/2014 1:00 AM | Comments: 0

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Jennifer Howard

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Jennifer Howard

Between a rock and a hard place is bad enough. Add rising river waters, and you have an idea where Manitoba Finance Minister Jennifer Howard is stuck these days.

Howard entered this summer with reason to believe the 2014-15 fiscal year would be a good one. Spring flooding was nearly non-existent, the economy was expected to grow steadily, if modestly, and the stubborn budget deficit her government has carried for five years would start to shrink.

All that may have been undone in large part by summer rains in Saskatchewan and western Manitoba that overwhelmed the Assiniboine River and the tributaries and lakes it feeds.

The province has roughly estimated costs from this flood could exceed $200 million, with most of that un-budgeted in the current fiscal year. And there are more costs on the way.

The province is under pressure to help farmers and other businesses crippled by the flood. Money has already been put on the table to help fishers ($3.5 million) and there is a growing price tag for repairing roads, bridges and culverts that was not included in capital spending this year.

All that means any hope of lowering the deficit from the 2014-15 target of $357 million is, Howard says, pretty optimistic at this point. So optimistic she admits her goal now is merely to avoid increasing the deficit.

'There is no doubt this flood will have some impact on the budget'

-- Jennifer Howard

"I don't know about ahead of (the deficit target)," Howard said. "I'm going to try and focus on finishing on target. We have six months left in this year, and we have some things we can do to manage things. But there is no doubt this flood will have some impact on the budget."

Floods are a double-barrelled fiscal problem. Not only are they expensive to fight and to clean up, but they have a devastating impact on the economy.

Businesses in a flood zone buy less, hire less and earn less. That means less in sales, income and business taxes. For a province looking to slay a deficit, that is bad news indeed.

But fiscal pain is not the only pain the NDP government will suffer this year. Politically, opposition parties will give Howard little room to blame her deficit woes on the floods.

Tory Leader Brian Pallister has been careful not to chirp too much at Howard through the media while the flood-fighting effort is still underway. Still, if last year was any indication, you can expect a hard line from the Tories on the budget in general and the deficit in particular.

While the NDP has languished in red ink, the Tories have consistently argued costs related to fighting annual flood events are no excuse for running a deficit.

There was a hint of that in Pallister's recent demand that two outlets needed to reduce levels in Lake Manitoba and Lake St. Martin should be completed in three years.

The province claims it needs seven years to plan and dig the two channels, a time frame Pallister rejects. "The urgency is so clear that this should be treated as an emergency situation."

Pallister is not wrong to suggest a more expeditious completion of the channels. However, he should definitely have a plan in place to pay for it.

The province has budgeted $320 million over the next five years for flood infrastructure. Moving up completion of those two channels -- estimated to cost around $300 million -- would require either an increase in expenditure, or deferral of other projects. There are no other ways to get it done faster.

It is unlikely Pallister will be too specific about how to have his cake (build the channels quicker) and eat it, too (balance the budget). In opposition, you don't have to offer many solutions. Your job is to show voters the current government has none of its own.

How can Howard avoid the convenient analysis of the opposition? She is clinging desperately to the hope the economy grows enough to pay off the deficit and cover flood costs, without having to cut spending too much.

It is theoretically possible for a government to grow its way out of deficit. This is a big challenge right now because of the relatively modest growth projections. Add in a chronic flood threat, and you can see that this is an increasingly unlikely scenario.

It is quite likely next spring could be as bad or worse in terms of flooding as this year. A lot will depend on the winter snowpack, but we'll be entering the winter with waterlogged soil, a solid precursor for spring flooding.

We're in the midst of what could be the most costly flood cycle in the province's history. Since 2011, the province has spent more than $1.5 billion on flood fighting and mitigation. Some of that is rebated to the province from the federal Disaster Financial Assistance program, but not enough to insulate the provincial budget.

Trying to maintain program spending without deep spending cuts is, in this era of very modest economic growth, Howard's rock and a hard place.

Add in rising river water, and you can see just how easy it would be to drown.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition July 29, 2014 A5

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