On Monday March 12th, the Manitoba government released its 2nd budget since being elected in 2016. The often socially awkward Premier chose to use a kind of Trump-esque communication style by describing the 2018 budget as “the best budget ever.
As described in our post outlining the fall Throne Speech, we had a pretty good idea of where things were headed. But the budget really put the meat on the bones.
Although the budget gives us the financial framework of what departments will have to spend and where the money will come from, it’s short on detail. More information will roll out in the coming months. Bur for now, here are some highlights of what we know as well as a few red flags to keep an eye on.
Revenue: Less in means less out
At budget time, many of us focus on expenditures – how and where money will be spent. That makes sense because we want to make sure that important public services are available to us. But how revenue will be raised to pay for important services is also important.
A significant portion of government revenue comes from taxes, including personal taxes. There is a significant change in Budget 2018 that came as no surprise, yet is still alarming. Pallister made good on his promise to increase the basic personal exemption and index personal tax brackets. As explained in this article by Lynne Fernandez, this will significantly reduce revenues – leaving us with less money to pay for government services – by “an estimated $250 million by the end of 2020”, And if you believe the benefit to your personal finances outweighs this significant loss to the public purse, think again. Low income earners will “realize a benefit of $42 annually by 2020. Higher income earners will see an additional $255 over this period. So, not only will those who don’t need it reap the benefits of this regressive tax cut, there will be less money to pay for important services.
PST and the Carbon Tax
It’s also worth revisiting Pallister’s promise to reduce the PST by 2020 and the impact this will have on government finances. Reducing the PST will further reduce government revenues by $300 million. The Pallister government promises to offset this loss in revenue with its Carbon Tax , projecting it will bring in $240 million by 2020. But as described in this article, there are flaws in the Pallister Carbon Tax plan. Many big emitters will be exempt and using the revenue to offset tax reductions means ‘green’ opportunities will be missed. We think a carbon tax is a good thing, but revenue from a carbon tax could and should be used to support a comprehensive, equitable policy framework to reduce greenhouse gas emissions rather than support ill-advised tax cuts.
Budget 2018 allocates an increase of 0.9% for health spending. That’s a ‘cut’ because it is less than the 2.1% inflation rate. Nurses and health care providers will experience significant cutbacks in 2018. Long-term care will see a reduction in funding of $2,000,000 this year. Manitobans were promised an increase in long-term care beds but as of December 2017 none have been established. Cost cutting can also be seen in acute care and Manitoba’s Special Drug Program. Some patients will now be required to pay out of pocket for medical equipment and medications.
Check out the Manitoba Nurses Union for further analysis of what the budget means for healthcare.
Education funding will also see a cut when you compare the promised increase of 0.5 % to inflation. Budget 2018 allocates capital for 5 new schools. We’re pleased to see that the province has decided not to use the P3 model. In earlier posts we’ve described the problem with P3s. However, cuts to the education budget mean that it will be difficult to staff these schools with teachers and support staff. Check out the Manitoba Teachers Society for further analysis of what the budget means for healthcare and education.
Post Secondary Institutions were also hit hard in budget 2018, with a cut of 1%. At first glance this might seem like a minor reduction, but it is not. As operating costs increase, universities and colleges will need to find new sources of revenue. Students can look for steep increases in tuitions made possible with the passing of Bill 31, the Advanced Education Administration Amendment Act, which allows for an increases of 5% plus “the percentage change in the average of the 12 monthly consumer price indexes between the previous 2 calendar years.” For 2018, that means a potential increase in tuition of 6.6 %. With a loss of funding from the Province as operating costs increase, PSE Institutions will have little choice but to increase tuition and other fees, making access to PSE less accessible. It is difficult to see how this will serve Premier Pallister’s “most improved province” mandate and its commitment to improve education outcomes in Manitoba.
Public Services and Privatization
Budget 2018 reinforces concerns that public services in Manitoba are under attack. Manitoba Government Employees Union (MGEU) highlights some concerns. The Pallister government has made clear its intentions to ‘modernize’ the public service – whatever that means. Last year wages were frozen and many positions were eliminated. This year the Pallister government introduced its strategy to “transform” the public service.
That’s likely code for further cuts and privatization as indicated by its most recent move to privatize air ambulance services.
Poverty and Housing
Premier Pallister has long said that his poverty plan centres on increasing the basic personal tax exemption and he has made good on that promise this year. It will indeed nudge some families over the poverty line, but it does nothing for those families earning incomes so low that they already don’t pay taxes. As noted above, it also takes a big chunk of revenue out the public purse that could be used for poverty reduction efforts.
Individuals and Families relying on Employment and Income Assistance will see no increases this year. Look to the Province’s Budget Paper, Reducing Poverty and Promoting Community Involvement you’ll find a few red flags to keep an eye on. The Province is currently consulting with Manitobans and plans to change the indicators it uses to measure progress. It promises to “reform” Employment and Income Assistance. Changes to EIA are much needed, but beware. Past reforms under the banner of “welfare reform” have made things far worse, not better, for many people living in poverty.
The Poverty papers note that affordable housing is a priority. But don’t look for any new builds. The Province has further reduced capital borrowing for new construction to a total of $160 million since elected. It has also eliminated the rental housing construction tax credit for affordable housing, which will further dis-incentivize private sector developers. Further, the Province has yet to develop a strategy for affordable and social housing which could jeopardize access to the matching funds available through the federal government through its national housing strategy.
These are just a few highlights and issues to watch going forward. But also remember that budget 2018 needs to be analyzed in context of Pallister’s long-term strategy to shrink government services by selling off public assets and privatizing public services.
That plan is mapped out in the Manitoba Fiscal Performance Review. Be sure to check that out for more of what we can expect from the Pallister government.