Province forecasts deep cut to deficit
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This article was published 29/09/2022 (185 days ago), so information in it may no longer be current.
The Manitoba government is projecting a boon to its bottom line, with the deficit anticipated to be slashed by more than half — to $202 million — at the end of this fiscal year.
“We are showing a further amelioration on the bottom line,” Finance Minister Cameron Friesen said. “There’s positive signs of growth this year.”
On Thursday, Friesen released the government’s first-quarter fiscal update for 2022-23, and its annual report and public accounts for the past year.
According to the quarterly update, which covers the period from April 1 to June 30, the province’s forecast deficit is now $202 million, an improvement of about $346 million from the budget tabled in April.
The financial turnaround was primarily attributed to “one-time,” unanticipated revenues from Manitoba Hydro.
The Crown corporation is expected to flow an additional $465 million into provincial coffers by the end of the fiscal year, owing to above-average water levels, increased electricity generation and an upward forecast for export electricity prices, according to finance officials.
In the 2022-23 budget, the province budgeted revenues of $120 million from Manitoba Hydro. The utility posted a $248-million loss in 2021-22 owing to drought conditions, according to its annual report.
Friesen described the “one-time windfall” at Hydro, and the deviation from the budget, as challenges for government, Hydro and rate payers.
“That much variation from budget, that’s volatility, and volatility equals risk,” he said.
Friesen, the minister responsible for Manitoba Hydro, said the Progressive Conservative government will work with the corporation’s board and executive to determine how the unexpected boost could stabilize the utility and benefit ratepayers.
Manitoba Hydro projects $585-million profit
After drought had dried up revenues for Manitoba Hydro, the utility is now anticipating an estimated $585 million in profit this fiscal year.
The Crown corporation released its annual report and first-quarter fiscal update Thursday.
According to the utility, drought conditions in the 2021-22 fiscal year and higher financing and depreciation expenses for the Keeyask generating station led to a consolidated $248-million net loss.
“The drought was one of the worst on record. It not only weakened our ability to generate and sell surplus energy on spot markets in the United States and Canada, but we also had to import energy to serve our customers,” Hydro chief executive officer Jay Grewal said in a news release.
The $248-million loss was more significant than forecast in the corporation’s last quarterly report, which had projected a $221-million loss.
According to Hydro, decreases to net income were partially offset by higher domestic electric revenues, colder winter weather and customer growth.
However, the utility is reporting a substantial turnaround in its income for the first three months of the fiscal year (April to June). The corporation reported a net income of $37 million for the first quarter, compared to a $19-million loss in the same period last year.
As of June 30, Hydro projected a net income of $585 million, based on increased electricity generation and significantly higher export revenues.
“The change from the drought last year to high water conditions this year is extraordinary,” Grewal said.
However, the CEO said the corporation’s forecast could swing up to $300 million in either direction under a range of energy price forecasts.
According to the utility, more than half of the increase to increase to export revenue is driven by higher projected energy market prices.
In total, provincial revenues are forecast to come in $537 million higher than first budgeted and includes a $72-million transfer from the federal government to tackle surgical backlogs.
Spending, meanwhile, is forecast to increase by $191 million to support the Tories’ family affordability program and pressures in the health-care system.
An economic slowdown is also anticipated on the heels of rising interest rates, a slowing housing market, persistent inflationary pressure and the Russian invasion of Ukraine, according to finance officials.
“Economists are saying that we are turning towards a trough of some kind. We don’t know how low and not all economists will agree on when,” Friesen said. “But it is clear in this year, that while there might be updates on revenue, there will also be, we believe, a weakening story on those revenue numbers.”
The Tories have promised to balance the budget by 2028. However, Friesen said his government has no interest in “shorting the good investments” to provincial services to hit that goal ahead of the next general election, due in October 2023.
“Even though it looks like (a) $200-million deficit is coming very near balance, it is really unclear what that path looks like going forward,” Friesen said.
Opposition Leader Wab Kinew said the smaller-than-anticipated deficit demonstrates there is money available to address the ongoing staffing crisis in the health-care system.
“A top priority for Manitobans right now is to the see the health-care system repaired,” the NDP MLA for Fort Rouge said. “If there are a bit more resources available this year than initially planned, then I think most Manitobans would like to see those deployed to help those nurses, help those doctors, respiratory therapists on the front lines.”
Reflecting on the past fiscal year, Friesen said the world was a dramatically different place when the 2021-22 budget was first delivered in April last year, as the COVID-19 pandemic severely restricted economic and social life.
At the end of the fiscal year, the province posted a deficit of $704 million, which was $893 million lower than the budgeted deficit of nearly $1.6 billion.
A significant increase in personal and corporate tax revenues as the economy recovered and an increase in federal transfers (namely, the one-time $145-million Canada Health Transfer and funding for early learning and child care) contributed to the improved deficit, according to finance officials.
The increase to tax revenue was largely in keeping with other Canadian provinces, though other jurisdictions reported a stronger rebound, the minister said. Last year, provincial revenue came in $1.2 billion over budget, for a total of $19.1 billion.
Spending during the past fiscal year also increased by $403 million compared to budgeted amounts.
The families department went 15.8 per cent over budget, with increases attributed to repairs and maintenance to Manitoba Housing units; additional funding for child and family services authorities and homelessness shelters; and to increase community disability services sector wages.
Spending on health services was 2.5 per cent (or $180 million) higher than budgeted, related to increased costs for acute care services. Emergency expenditures were $35 million over budget and attributed to the AgriRecovery Drought Assistance Program and fire suppression.
The province’s net debt at the end of March was $28.5 billion, down 5.1 per cent from the budget.
Danielle Da Silva
Danielle Da Silva is a general assignment reporter.