Manitoba posts tiny surplus in 2019-20, but the black ink will be short-lived

Manitoba posted a tiny surplus for the end of 2019-20 — two fiscal years ahead of schedule — but is predicting a massive deficit in the coming year due the pandemic.

The province posted a $5-million surplus on its budget for the year ending March 31, 2020, according to public accounts published Tuesday.

That’s a $365-million swing from the $360-million deficit projected when the budget was presented a year ago.

The balanced budget comes as bittersweet news for Premier Brian Pallister’s Progressive Conservative government, which has fought hard to tighten spending in an effort to eliminate Manitoba’s red ink by 2022.

The economic impact of the COVID-19 pandemic means the surplus will be short-lived. The province is now expecting several years of deficits, starting with a $2.9-billion budget shortfall at the end of the 2020-21 fiscal year. 

“We acknowledge there is no realistic prospect of another balanced budget for several years, and our priorities are now dedicated to stewarding Manitobans to a safe recovery and economic restart,” finance officials say in the public accounts.

“We are grateful for the financial capacity to afford this response to COVID-19. We believe we can use the same patient and steady discipline to restore provincial finances to order in the medium term.”

A number of factors allowed the province to balance its books in 2019-20.

Income-tax revenue exceeded projections by $265 million, “mainly due to a strong pre-pandemic economy that raised incomes from employment, unincorporated businesses, and corporations; all of which increased household incomes.”

The province also put off about $404 million in planned infrastructure projects, including the Lake Manitoba flood channel, where construction has suffered regulatory delays.

More revenue and less spending more than offset overspending in a number of departments, including health care, where spending exceeded budget projections by $199 million.

The 2019-20 budget surplus would have been even higher — $43 million — had the province agreed with an auditor general recommendation to include Workers Compensation Board assets and two trust funds within the budget. Officials say they intend to resolve this accounting dispute via legislation.

The province also shaved $900 million of its total debt in the last fiscal year. Net debt stood at $25.2 billion at the end of March, down from a projection of $26.1 billion.

The future outlook is uncertain, even as Manitoba’s economic indicators outpace those of most other provinces.

In a financial summary for the first quarter of 2020-21, finance officials say they expect Manitoba’s economy to decline by 5.2 per cent this year and rebound next year by 4.8 per cent. 

“There are still tens of thousands of Manitobans looking for work, and our debt levels are growing at an unprecedented pace,” officials say in the summary.

The recovery so far has also been uneven across different areas of the economy.

“Some sectors are experiencing little disruption in sales or in job losses and are thriving during the pandemic, while others are hard hit, particularly within the service sector, including accommodation and food service and information and culture,” officials say.

For example, professional, scientific and technical services bounced back, while jobs in accommodation and food services remain at 13 per cent below pre-pandemic levels, the summary says.

Retail spending also rose to what the province describes as “an unprecedented” $1.9 billion in sales in July. Health-care retailers saw a surge in sales, while clothing stores saw a sharp decline.

A low demand for goods, however, has driven Manitoba manufacturing sales down 7.6 per cent on a year-to-date basis. Merchandise exports are marginally down half a percentage point, with sales to the U.S. down 5.5 per cent on a year-to-date basis.

“Despite some encouraging signs in the COVID-19 recovery phase in Manitoba, the outlook for the economic activity and income generation remains highly uncertain for the rest of the fiscal year,” officials say in the summary.

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