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Economic storm brewing for Manitoba

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28Sep

Manitoba’s mandate-hobbled Auditor General (who lacks the power to “audit” policy and policy outcomes) has provided stark information on the provincial government’s finances. Borrowing is out-of-control. What Pallister’s own Treasury Board describes as economic “storm clouds” loom in the future — rising interest rates on rising debts, Hydro’s rocketing borrowing, and credit downgrades.

Pallister forecast a balanced provincial budget by the end of his coveted second term, which would be 2024, assuming his government survives with its majority in the 2020 election. The only way his forecast works depends on his new carbon tax, ramping up Hydro rates well beyond the annual inflation rate, and slimming civil servant staff while capping pay hikes to sub-inflation levels for a decade.

The auditor’s information reveals that the debt-choked Manitoba government will have difficulty slaying the provincial deficit as interest rates inevitably increase. For just every 1% increase in rates — once current debts are renewed — would add at least another $220 million more in interest costs annually, plus eventually more than $250 million more annually for utility customers.

With $15 billion of direct provincial debt to mature within five years and additional provincial core borrowing of another $2 billion, annual interest cost increases will build quickly. As for Hydro, while replacing the $4 billion of debt to mature over the next five years will not push up Hydro’s costs, new Hydro debt of as much of another $10 billion will be subject to higher rate hikes — extra costs to be recovered through utility rate hikes.

Buried within Auditor General Norman Ricard’s most recent report on the province’s public accounts is his observation that, over the 10-year period ending in 2017, government’s loans, guarantees and obligations have virtually doubled. While it took 137 years for the provincial government to reach financial liabilities of $22 billion, only 10 years of continuing NDP governments was “required” to double that level by the end of fiscal 2016-17. The province requires $1 billion to meet its current core government operations debt servicing obligations, but then add in provincial government entities (Crown corporations, Hydro, plus other government entities), which are already paying out another $700 million in debt servicing costs — funded by utility and other ratepayers.)

Speaking of Hydro, it’s debt has and still is soaring — from $5 billion to $16 billion over 10 years — and headed for $25 billion.

Manitoba’s taxpayers anticipating real and substantial tax breaks from the Pallister government are dreaming. In a government that painfully lacks capacity for serious public sector reform, expect tax hikes (by way of carbon tax), higher Hydro rates and MPI premiums, municipal tax and fee increases (forget help coming from the province for municipal governments), and higher tuition for students. Pallister’s government needs more from you to reduce its annual deficit and bonus its cabinet ministers (now “suffering” from deductions from their salaries because of a “too high” deficit).

An unpublished-widely Treasury Board financial analysis, making the rounds of Crown boards of directors, suggests “storm clouds” are forming. Frankly, prepare for a “downpour,” one that will soak taxpayers and utility ratepayers after the 2020 election. More in two weeks.

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