The Manitoba government believes the economy can steadily recover despite the deficit surpassing $2 billion, but the business community worries the bounce back could still be derailed by the virus.
The provincial deficit topped $2 billion in the last fiscal year because of the massive cost of fighting the COVID-19 pandemic and the staggering loss in government revenue.
On Thursday, the province released an audited final report for the fiscal year that ended March 31, 2021. The public accounts detail data from 140 government entities, including Crown corporations such as Manitoba Liquor and Lotteries and Manitoba Hydro.
The province took a big hit on the revenue side, including the loss of income tax from businesses and the loss of gambling revenue because casinos and VLT lounges were closed for many months.
By far, the biggest expense was the ballooning cost of health care. Hundreds of millions was spent on pandemic aid programs, such as wage subsidies for businesses and one-time $200 payments to every senior.
The Progressive Conservative government said it expects the deficit to shrink to $1.5 billion this fiscal year as the economy recovers.
Had the pandemic not occurred, Manitoba would have had a $357-million deficit.
“It really was a very challenging year to predict." — Finance Minister Scott Fielding
"It really was a very challenging year to predict," Finance Minister Scott Fielding said.
"You had to make a lot of policy decisions on the fly, and that’s what all governments did."
Fielding said the government is on track to balance its books within eight years, unless there’s a drastic wave of COVID-19 that shuts down the economy again or dries up U.S. demand for Manitoba goods.
Federal transfers are expected to jump, partly due to a recent child-care funding agreement the province signed with Ottawa. Based on various government, bank and industry projections, the Manitoba government projects its real gross domestic product to grow by 5.5 per cent in this fiscal year, and 3.7 in 2022-23.
Underspending on infrastructure builds bumpy road for ManitobaClick to Expand
Posted: 7:00 PM Sep. 23, 2021
The Manitoba government’s debt burden is lower than expected this year, even with the hundreds of millions of dollars spent on handling the COVID-19 pandemic.
Part of the reason is the province has massively underspent its infrastructure budget — again.
At the same time, the projections have unemployment sitting fairly high at 6.8 per cent for this fiscal year, and 5.7 per cent in the next.
That’s underpinned by expected growth in fields such as manufacturing, a key industry for Manitoba that has been hindered by supply chain disruptions but is less labour-intensive than other industries.
"We're getting our heads above water, but we're still far from shore," said Loren Remillard, head of the Winnipeg Chamber of Commerce.
He said city business owners are concerned about how federal wage subsidies will be phased out, paying off debt, and inflation.
"These are all potential headwinds that could really derail our economic recovery."
The public accounts also reveal the pandemic economic supports that got the most use, and those that were unspent. Only $21 million of the $491 million in programs for businesses and non-profits was not spent.
For example, the Progressive Conservative government only spent $800,000 of the $10 million it budgeted for foster care organizations and daycare centres that had to send staff home due to COVID-19.
“We're getting our heads above water, but we're still far from shore.” — Loren Remillard, head of the Winnipeg Chamber of Commerce
That’s because far fewer staff had to stay home than expected during the third wave of COVID-19.
Fielding said unspent money will be moved to other areas, as an anticipated fourth wave of COVID-19 arrives.
Yet the NDP argued not enough was spent on health care, education and business supports.
"Manitobans are tired of waiting for this PC government to focus on what they need. It’s time for a government that invests in the projects and services that help families and make our communities stronger," wrote NDP finance critic Mark Wasyliw, who called for more spending on rural and northern development.
The Manitoba Federation of Labour argued the pandemic supports catered too much to businesses instead of workers.
"A lot of the programs that were put in place weren't clear for people to access," said federation head Kevin Rebeck.
“Manitobans are tired of waiting for this PC government to focus on what they need. It’s time for a government that invests in the projects and services that help families and make our communities stronger.” — NDP finance critic Mark Wasyliw
For example, Manitoba expects to spend $3 million on its COVID-19 paid sick-leave program, which was announced in May with no spending estimate. The program covers five work days to a maximum of $600, and the estimate means just 5,000 people could use the program if they all claimed the maximum amount.
"It's completely inadequate; the program was designed to be completely voluntary (and) underutilized," said Rebeck.
The PCs will elect either Shelly Glover or Heather Stefanson as their new leader on Oct. 30, and Rebeck hopes the winner will work with labour groups rather than fight them constantly, as former premier Brian Pallister did.
"There's an opportunity here to reset the relationship with workers and unions."
Manitoba has registered deficits in every year but one of the last 11 years. The province's net debt is forecast to approach a record $30 billion this year, equating to almost 40 per cent of gross domestic product.
Remillard said businesses are urging all levels of government to carefully craft support programs, so that people have enough to spend without driving up inflation, and businesses can shift from taking on debt to investing in innovation and training.
"With some of the scars of COVID, it will be years before they're healed. So, we need a strategy to get those scars healing quickly, and a recovery that is as robust as possible."
—with files from The Canadian Press