Lawsuit settlement, collective agreements and Hydro losses drive up Manitoba deficit

The Manitoba government posted a deficit in the last fiscal year of $1.97 billion, documents released Friday show. It is the largest in the province’s history outside of the COVID-19 pandemic.

The final numbers for the 2023-24 fiscal year, which ended in March, confirm projections from an earlier quarterly budget update and point to a number of factors. 

A drought reduced water levels at Crown-owned Manitoba Hydro, turning an expected profit into a loss. New public sector collective agreements covering teachers, civil servants, nurses and others, with retroactive raises, drove up expenses. And the NDP government’s decision to temporarily suspend the provincial fuel tax in January led to $104 million in lower-than-budgeted revenue at the pumps.

There was also a one-time, half-billion-dollar cost associated with a lawsuit settlement over federal payments to kids in child welfare. The class-action lawsuit was launched over a policy, enacted by a former NDP government, that clawed back the payments. The lawsuit was settled by the current NDP government this year, but the cost was attributed to last year’s budget, which was introduced by the Progressive Conservatives before they were defeated in the October 2023 election.

Booking such a cost in a previous year, when a payout begins to appear likely, is in line with standard accounting practices, the government said. The auditor general’s office confirmed the practice is normal.

Manitoba has run deficits in every year but two since 2009, and the government remains committed to balancing the budget by 2027, Finance Minister Adrien Sala said.

“We know that in order to deliver on that balanced-budget commitment, we have to do hard work of controlling expenses,” Sala said Friday.

“We’ll be making those decisions as we move into the following fiscal year, but that’s a lot of hard work that we have to do.”

Premier Wab Kinew has also talked about looking for areas in which the province can tighten its belt, but has said no decisions have been made yet.

The province is expecting somewhat easier fiscal times this year and a lower deficit of $796 million. 

It’s forecasting a profit at Manitoba Hydro instead of last year’s $172-million loss. And Manitoba’s share of equalization payments from the federal government, which are aimed at helping less-wealthy provinces, is jumping sharply from last year by 24 per cent, or $840 million.

The NDP government has also put on hold plans for some of the new schools promised by the former Tory government. Sala accused the Tories of making the commitments without having funding in place, while the Tories have said the funding was accounted for.

On the tax side, the government will forgo more fuel revenue this fiscal year. The NDP recently announced a second extension of the fuel-tax holiday through to the end of December. The tax normally brings in $340 million annually. 

This report by The Canadian Press was first published Sept. 27, 2024