Economists believe PCs will balance budget before election
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A new report from the Canadian Centre for Policy Alternatives puts Manitoba on track to balance its budget in time for an election, but the province’s finance minister offered no assurances books would be back in the black by next year.
Centre senior economist David Macdonald said the fiscal situation for most provinces in Canada has changed substantially from the spring, with many posting improved deficits or surpluses.
Macdonald authored a report, released Wednesday by the CCPA, titled “Flush with cash: the provinces are richer than they think.”
The jurisdictional scan conducted by the independent think tank concluded combined provincial deficit projections of $48.5 billion for the current fiscal year have turned into a $7.1 billion surplus.
“The original doomsday scenarios that were projected for the first couple of years of the (COVID-19) pandemic, had largely been revised away even by the spring,” Macdonald said in an interview Tuesday. “But even between the spring and the fall, there’s been a huge change in this fiscal year.”
While Manitoba has not seen its deficit improve to the same degree as Saskatchewan or Alberta, there is a good, fiscal news story unfolding in the keystone province, driven by a rebounding economy and increased revenues, Macdonald said.
“The provinces are much flusher with cash than they thought they were going to be,” Macdonald said. “The budget is essentially balanced right now.”
In September, the provincial government released its first-quarter fiscal update for 2022-23. The quarterly update, which covers the period from April 1 to June 30, the forecast deficit was $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 and a $72 million transfer from the federal government to tackle surgical backlogs.
According to Macdonald’s report, the projected deficit is realistically closer to $2 million, when a $200 million risk fund is removed from the equation.
“The balanced budget projection for 2022-23 mirrors Manitoba’s posted pre-pandemic budget balance, when it declared a minor $5 million surplus. By this year, any lingering financial effects of the pandemic on the province were gone,” the report states.
Macdonald said provincial financial officials may include a contingency to account for uncertainty in the deficit. The inclusion of a risk fund is not universal and used by four provinces in Canada, he said.
“The bureaucrats within finance have done their best to calculate the deficit within their power, and they reported that deficit at $2 million,” Macdonald said. “And afterwards, they say it could be worse… and so you add a nice big round number on there.
“That doesn’t represent the best possible estimate of the deficit.”
Provinces can use some of the windfall to better protect lower-income households and bolster income supports, Macdonald said.
“Inflation is great for provincial finances. It makes some sense to offset some of those impacts for the lowest-income households so they’re made not worse off.”
Manitoba Finance Minister Cameron Friesen was not as confident about the fiscal future when asked whether a balanced budget could be part of the Progressive Conservative government’s plans in 2023.
A general election is due by Oct. 3, 2023, though Premier Heather Stefanson has not ruled out an earlier date.
“I will not at this podium today look into a crystal ball,” Friesen said. “I think it would be very, very rash for a finance minister to be extemporising today, there’s a lot that we are coming to understand.”
A mid-year financial report is expected in December, where the province will be in a better position to judge its revenues and expenditures, Friesen said. The resettlement of Ukrainians in Manitoba is expected to have a significant financial impact, Friesen noted.
However, the government is committed to making progress towards reducing the deficit, he said.
“We all now know how important that is in these highly volatile economic conditions,” Friesen said. “It’s very, very important that government is addressing its debt and deficit.”
Danielle Da Silva
Danielle Da Silva is a general assignment reporter.
Updated on Wednesday, November 2, 2022 8:04 AM CDT: Adds related posts