Budget season in Manitoba

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This article was published 06/04/2024 (636 days ago), so information in it may no longer be current.

Early spring in Manitoba is the season when government budgets, not flowers, pop up on the landscape. Delivery of the budget speech and the release of several, voluminous budget documents is like the tip of an iceberg, with most of the budgetary process hidden below the surface.

It was probably the hope of Finance Minister Adrien Sala and Premier Wab Kinew that Tuesday’s budget was one for all seasons. This budget attracted more anticipation than usual because of the widespread speculation about how the NDP could possibly deliver on its extensive and expensive spending commitments, without raising major taxes, and simultaneously delivering a balanced budget by the end of its first term.

There have been many comments on the actual budget contents from a wide variety of perspectives As an alternative, I want to explain, albeit briefly and incompletely, the process by which the budgetary numbers and forecasts are produced. Budget documents imply order, precision and certainty, whereas the reality involves more than a little messiness, imprecision and speculation.

Modern budgeting serves multiple purposes: financial (alignment of taxes and spending, deficits, borrowing, credit worthiness); economic (promoting productivity and prosperity, smoothing out fluctuations in the economy, and equity); political (fulfilling election promises, supporting democratic accountability and generating voter support); and managerial (planning, control, efficiency and administrative accountability).

Multiple potential purposes make glib judgments about the overall effectiveness of a particular budget inappropriate.

Rhetorically, Manitoba’s two main parties appear to differ fundamentally in their approaches to budgeting. The Progressive Conservatives ritualistically assert that low taxes, balanced budgets and limited government intervention in the economy lead to prosperity and opportunities. In contrast, the NDP is more prepared to run deficits to finance investments in economic and social progress and only somewhat grudgingly acknowledge that high taxes might impair economic growth. Because of the budgetary constraints faced by all governments, such seemingly fundamental differences involve simplification and exaggeration.

Budget preparation normally starts months before budget day and the execution of budget announcements takes place over the course of the fiscal year (which runs from April 1 to March 31), usually with improvisation and implementation gaps along the way. After the budget speech, up to six days of debate in the legislature occurs before a vote to approve the budget occurs.

Given the timing of the last election, it made practical sense for the Kinew government to stick with the major tax cuts and spending increases introduced last spring by the former PC government.

Intended to spur a political recovery, those opportunistic, fiscally irresponsible budgetary moves have been blamed for the large deficit and very tight budgetary situation that the finance minister faced when preparing this year’s budget. Blaming the other side, however, will lose its political force quickly.

Sala had primary responsibility for the development of the budget, but his work was guided by the mandate letter from Kinew released publicly last fall. Surprisingly, little media attention was paid to that two-page document which set forth the broad outline for the budget, including instructions to end the mail-out provincial property tax rebates to millionaires.

Historically, secrecy surrounded budgetary planning to avoid the risk that outside actors would gain unfair economic advantage. However, with today’s heavy emphasis on political marketing, most governments now selectively “telegraph” some of their budgetary plans through pre-budget announcements and strategic “leaks” to selected reporters. Multiple pre- and post-budget announcements are meant to deliver maximum favourable publicity.

Before the budget speech, there are public and private consultations with different sectors and institutions. Inside government, ministers and departments lobby for new or sustained spending. There is the treasury board committee of cabinet which is formally responsible for expenditure management. However, the minister of finance is the main guardian of the public purse and the other treasury board ministers are mostly spenders, especially when it comes to their own department.

In advance of the budget, NDP allies on the left insisted the government has a revenue, not a spending, problem, and that it should reverse the tax cuts introduced by the PCs. However, a recent painful political lesson meant this was unlikely to happen.

From 1999 to 2009, finance minister Greg Selinger delivered, presumably directed by NDP premier Gary Doer, a succession of cautious, balanced budgets involving both selective tax cuts and targeted spending increases. Five years after becoming premier, Selinger broke a promise not to increase the sales tax and the NDP was badly defeated in the 2016 election.

Kinew’s mandate letter to the finance minister included the instruction to produce a “pragmatic” budget. Tuesday’s budget forecast the elimination of the deficit by 2027-28. This optimistic scenario is based on limiting expenditure increases to two per cent annually, which is a very tough target to achieve. Economic good fortune, generous federal transfers, and consistent support by the premier to maintain fiscal discipline, will all be required.

In a small, open economy and a political culture which is centrist, there are constraints on how far Manitoba governments can go in following ideological or highly bold budgetary policies. Jean-Baptiste Colbert, Louis XIV’s finance minister, said that “the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.”

He might have added the requirement “to avoid strangling any geese which lay golden eggs.”

Sala seems to get this.

Paul G. Thomas is professor emeritus of political studies at the University of Manitoba.