Manitoba government is providing support against affordability concerns while staying on the path to balance over the long term. While the projected deficit for FY 2022-23 ($548 million) isn’t going down as much as previously anticipated, it’s still less than half of last year’s shortfall ($1.4 billion). And balance remains on the horizon in seven years. Relative to FY 2021-22, the government expects total revenues to get a boost from an improving economic outlook while it sees expenditures staying mostly flat. Budget 2022 largely focuses on health and education, and delivers on previous tax cut commitments. The province’s indebtedness is projected to get gradually lighter over the medium term.
Revenues- Economic improvement drives revenues higher, tax cuts target affordability
Total revenues are projected to grow $661 million (or 3.5%) in FY 2022-23, to $19.4 billion, led by a 3.2% increase in tax revenues (which account for half of the province’s revenues). While income tax revenues are expected to be essentially flat this year, retail sales tax and education property tax are seen to rise modestly. Part of this growth will be offset by lower fee revenue, as Manitoba has committed to reduce non-commercial vehicle license registration fees by 30%. To government expects a slight increase in federal transfers, which make up one-third of total provincial revenues, thanks to higher equalization payments alongside higher revenues from bi-lateral agreements (including the allocation as part of the Canada-Manitoba Canada-Wide Early Learning and Childcare Agreement).
Budget 2022 also includes several tax rebates, some of which build on prior commitments set out in Budget 2021. Budget 2022 commits to increasing the Education Property Tax Rebate from 25% in 2021 to 37.5% in 2022 and 50% in 2023. The budget also introduces a new Renters tax credit. Previously, renters’ contributions to Education Property Tax were based on 20% of annual rental costs. Instead, the Renters Credit will now be calculated on a monthly basis, and eligibility has been expanded to include those on Rent Assist (but not Employment/Income Assistance) and social housing (rent geared to income). Manitoba has increased the
Health and Post-Secondary Education Tax Levy exemption level to $1.75 million (from $1.5 million) and payroll threshold to $3.5 million (form $3 million) to assist small businesses, alongside an enhancement of the Small Business Venture Capital Tax Credit.
Manitoba has expressed its desire to maintain tax-competitive with other Western Provinces. Budget 2022 includes several measures to facilitate this goal, including some targeted tax measures to stimulate small-business investment.
Expenses- Prioritizing Health Care and Education
Manitoba’s total budgeted expenditures for FY 2022-23, at $19.9 million, are slightly below (down $184 million or 0.9%) the prior fiscal year. The focus in Budget 2022 was health and education, with a few tax rebates framed as items to improve affordability. Health, which accounts for one-third of Manitoba’s operating expenditures, will receive a similar allocation as in FY 2021-22, at $6.7 billion. The province will prioritize addressing backlogs in surgeries and diagnostics created by the pandemic, develop a new Seniors Strategy for aging in place alongside investments in long-term care, and implement the first year of the province’s five-year mental health plan. At $3.4 billion, Manitoba’s allocation to education is 6.1% ($201 million) higher this year. In partnership with the federal government, the province will create 716 new child care spaces in centres and support 50 new home-based space in FY 2022-23, while expanding the provincial child care subsidy, reducing fees by 50% this year. Provincial debt servicing costs are projected to grow to $1 billion, representing slightly more than 5% of total expenditures. This burden is roughly in line with other Prairie Provinces.
Capital Plan- New schools and highway maintenance
Manitoba will invest $3.1 billion in strategic infrastructure in 2022, more than double the level of investment in 2021. The Capital Plan includes projected spending of $3 billion in 2023 and $2.7 billion in 2024. The province’s three-year plan includes an allocation of $1.5 billion in highway capital (including $731 million this year for Roads, Highways, Bridges, and Flood Protection). The province is prioritizing building 20 new schools. Manitoba’s declining allocation to buildings, equipment, and technology over the three-year plan reflects the completion of these projects.
Debt-to-GDP- Trending in the right direction
At $30.5 billion in FY 2022-23, Manitoba’s net debt level is 4.3% above FY 2021-22. Nevertheless, Manitoba’s net debt-to-GDP level, at 35.9%, is slightly below FY 2021-22 thanks to solid forecasted nominal GDP growth of 5.8% in 2022. Manitoba’s projected net debt-to-GDP ratio will fall over the medium-term to 34.8% at the end of the fiscal horizon. The ratio is higher than that of other Prairie Provinces but in line with levels seen in Central Canada. Budget 2022 includes a $4.7 billion borrowing requirement, $1 billion lower than Budget 2021.
Carrie Freestone is an economist at RBC. She provides labour market analysis, and is a member of the regional analysis group, contributing to the provincial macro outlook.
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