The Pallister government balanced Manitoba’s books in 2019-20 — the first time it has been accomplished in 11 years.
During normal times, that would be an achievement widely celebrated by those who believe governments should live within their means.
However, like most aspects of our lives these days, news this week the province posted a modest surplus two years ahead of schedule was quickly overshadowed by the daily barrage of COVID-19 reports — and the reality that whatever financial gains were made over the past four years have been wiped out by the pandemic.
What may not be getting enough attention, however, is how much worse the state of the provincial treasury would be today had the Tory government not eliminated a deficit fast approaching $1 billion four years ago. It’s a point Premier Brian Pallister makes often, and it’s a valid one.
Provincial governments across the country have seen their bottom lines collapse under the weight of a pandemic that has ravaged tax revenues and catapulted expenditures to unprecedented levels, especially in health care. For Manitoba, it could result in a deficit of $2.9 billion in 2020-21 (or more), according to Manitoba Finance’s first-quarter financial report released Tuesday. It's expected to be the highest deficit in Manitoba history.
However, future generations would have faced a far greater debt burden had Manitoba not entered the pandemic in a position of financial strength. Not only was the deficit eliminated, net debt has nearly flatlined for the first time in 12 years (up only $125 million to $25.2 billion in 2019-20 compared with the previous year).
Debt had been growing by about $1 billion-plus a year since 2008. While part of that improvement was driven by the Pallister government’s persistent underspending of its infrastructure budget ($404 million under budget in 2019-20), it’s also the result of a falling deficit.
Had debt continued to grow at the previous pace, debt levels would have been far higher post-pandemic, driving up finance charges and almost certainly resulting in a worse credit rating.
According to the 2019-20 public accounts, also released Tuesday, the province went from a deficit of $932 million in 2015-16 to a surplus of $5 million in 2019-20. Critics have claimed the Pallister government balanced the books largely by slashing spending in health care, education and family services. Those claims are not supported by the evidence.
What the audited statements show is annual spending grew by $1.79 billion from 2016 to 2020, an average increase of 2.7 per cent a year (not adjusted for inflation). Annual revenues during that period were up $2.73 billion, or an average yearly increase of 4.3 per cent. More than $1 billion of that came from federal transfer payments, by far the single biggest revenue driver.
Between soaring revenues and modest spending hikes, the provincial government managed to wrestle the deficit to the ground well ahead of a planned balanced budget in 2022.
There was some pain along the way, including the shrinking of the civil service by about one-sixth over four years. But there were no deep cuts to health-care spending, or to any other major area of government.
Health-care spending jumped from $6.225 billion in 2015-16 (the year the Tories came to power) to $6.513 the following year. It fell to $6.469 billion in 2017-18, but was still up 3.9 per cent over two years. Health spending grew to $6.572 billion in 2018-19, and rose to $6.873 billion in 2019-20.
There have been cuts to some areas of health care. But there have been spending increases, too, including for expanded dialysis capacity, orthopedic surgery, costs associated with the new Women’s Hospital, and a growth in physician fees. All told, health spending is up $648 million over four years, an average annual increase of 2.5 per cent.
The story is similar in other government departments, including education, families, and justice. There have been cuts in some areas and increases in others (spending on social assistance-related programs has soared 21 per cent over the past four years). That's a normal part of managing public-sector finances as service delivery evolves to reflect government priorities.
The past four years have been marked by modest spending increases and shifting resources within government sectors. For that, taxpayers have been well-served, especially as government now grapples with a new and severe financial challenge.
Tom has been covering Manitoba politics since the early 1990s and joined the Winnipeg Free Press news team in 2019.