Third-quarter fiscal report projects province’s forecast deficit now almost $2B By: Danielle Da Silva and Carol Sanders Posted: 11:51 AM CDT Friday, Mar. 22, 2024 Last Modified: 6:54 PM CDT Friday, Mar. 22, 2024 Updates

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A “doom and gloom” update on the province’s finances Friday included news of a forensic audit of one health region, the payout of hundreds of millions in legal settlements, and a forecast deficit that’s grown to nearly $2 billion.

The third-quarter report puts the projected shortfall at $1.99 billion as of Dec. 31, 2023, up from the $1.6-billion deficit forecast at the end of September.

“The biggest drivers that have led to this increase in the scope of the deficit are tied to increases in health-care expenditures that are mostly driven by collective bargaining-related costs,” Finance Minister Adrien Sala said at a Friday news conference. “There was a flurry of very last-minute collective bargaining agreements that were put in place prior to us arriving to government. The impacts of those collective bargaining agreements are now coming online.”

After the NDP won the Oct. 3 provincial election, the second-quarter report released in December noted decreased tax revenues, over-budget health spending and forecast losses at Manitoba Hydro. It showed the province was on track for a $1.6-billion deficit — which would’ve been the largest non-pandemic deficit in Manitoba history.

Total provincial revenue is projected to be $901 million below budget, mainly because of lower income from Manitoba Hydro as a result of drought conditions, decreases in income taxes and the government’s fuel-tax holiday.

The report indicates provincial fuel-tax revenue will be $101 million below budget, mostly due to the Jan. 1 gas tax holiday. Previously, the government estimated the tax pause to cost $82 million in the final three months of the fiscal year. Sala wouldn’t say ahead of the April 2 budget if the six-month gas tax holiday will be extended beyond July 1.

Expenses, meanwhile, are projected to be $733 million higher than budget.

“This increase in expenses is largely attributable to significant and unbudgeted overspending in the health care bureaucracy,” Sala said.

His government has ordered a forensic audit of the Northern Regional Health Authority and comprehensive financial audits at Shared Health, Winnipeg Regional Health Authority, Interlake-Eastern Regional Health Authority and Prairie Mountain Health.

While promising the government would be accountable and transparent in its budgeting, Sala wouldn’t say why Northern Health is to undergo the audit — only that it will be on a “somewhat deeper level” than the audits in other health regions.

“These audits are important because we know that Manitobans want to see value for our health care spending,” Sala said. “We’ve seen health-care spending go up in recent years but we’re not necessarily seeing better outcomes. These audits demonstrate that we are concerned about the direction of health care spending and that we want to see action to remedy that and that it’s not acceptable to see these increasing costs go up without better outcomes for Manitobans.”

Northern Health CEO Raj Sewda was not available for an interview Friday but issued a statement about the ordered forensic audit: “We welcome and respect the audit process underway. Such exercises identify opportunities for improvement, and learnings for the benefit of patients and their families on the health care journey.”

When asked about its “comprehensive” audits, Shared Health and the WRHA issued statements.

“We share government’s desire to ensure funding is being used thoughtfully and efficiently in the interest of patient care,” Shared Health said.

“We will be working with government to review budgeting and spending within the WRHA, and will co-operate fully with the financial audit that will be conducted,” the WRHA said.

Sala said the audits will review budgeting and spending practices to ensure “every single dollar that flows will deliver real results for Manitobans. We need to do things differently. We need to budget differently than the previous government,” Sala said.

The report also attributes the worsening deficit to “provisions for the settlement of longstanding lawsuits” in the Families and Justice departments.

“We share government’s desire to ensure funding is being used thoughtfully and efficiently in the interest of patient care.”–Shared Health

Sala declined to elaborate on the lawsuits that were settled. Previously, Families Minister Nahanni Fontaine said the province was nearing a settlement related to the clawback of the federal children’s special allowance from youths in the child-welfare system.

The Manitoba Métis Federation declined to comment Friday but a spokesperson said stakeholders connected to the children’s special allowance lawsuit may issue a statement Monday.

The fiscal update highlighted “major expense variances” totalling $99 million in the Families department and $124 million in Justice.

“The last government did not properly prepare or budget for those costs,” Sala said. “That’s what’s driving some of this deficit increase that we’re seeing here today.”

Sala promised Manitobans would be “very happy” with the NDP’s first budget.

“We are going to be showing Manitobans that we can both make the investments in the things that they want to see us invest in as a new government, namely health care and affordability, while we show a path to balance,” said Sala.

The NDP have promised to balance the budget in their first four-year term.

PC finance critic Obby Khan questioned the New Democrats presenting the province’s financial situation as “the world is on fire” and “doom and gloom” that they will somehow “magically” fix with their upcoming budget.

Khan called them hypocritical for promising transparency and accountability then refusing to explain the reasons for ordering a forensic audit in Northern Health or offering any details on the Families and Justice department legal settlements.

“The NDP need to really come clean with Manitobans on what’s really happening,” Khan said Friday. He said they need to stop “the blame game” and pointing fingers at the previous government.

“They will have been in government for half of this fiscal year. They are responsible for the decisions and governing going forward and that’s the reality of the situation,” Khan said.

danielle.dasilva@freepress.mb.ca

carol.sanders@freepress.mb.ca