Manitoba’s latest budget projects a deficit of $521 million by this time next year.
But what’s the difference between that and the provincial debt, which is now over $25 billion?
“Whenever you run in deficit, you have to borrow in the capital markets, and Manitoba is a very highly indebted province,” explained John McCallum, professor at the Asper School of Business at the University of Manitoba. “We’re getting up to a level relative to our capacity to service that’s leading bond-rating agencies to have some concerns. If you don’t get the deficit down, eventually you reach a point where you start to pay way more for the money you have to borrow.”
Manitoba will be spending over a billion dollars on debt-servicing costs this year, the first time that number has been eclipsed. Moody’s Investors called the 2018 budget positive, but noted that risks do remain.
“At the real extreme, you start to even have trouble raising money,” McCallum said. “It’s important, not that we get the deficit exactly to zero, but that we start getting off the trajectory that the previous government had the province on with respect to deficits. They were not sustainable.”
McCallum said the growing debt of Manitoba Hydro is a big concern, but limited spending increases to delivering health care and education is a big step towards hacking down the deficit. This budget has Manitoba spending over $9 billion combined on the services, a less than 1 percent jump from the previous year.
“If they can sustain that kind of much lower growth in $9 billion of spending, it starts to compound. I think what they’re trying to do there is courageous and innovative.”
McCallum compared the current state of affairs with the previous NDP government, which he said was wrought with dysfunction and saddled by poor management oversight.
“They’ve gone out and brought in Deloitte and KPMG. I’ve taught these kind of people for 45 years, and they know how to organize services. I think if we give this government time, we’ll start to get some efficiencies out of this $9 billion,” McCallum said.
“That really is the path to a sustained, balanced budget. It’s that $9 billion providing the same level of service, but costing less. Not because you lay people off, because you organize them better.”
The province still hopes to present a balanced budget by 2024.