CCPA-MB Budget Submission February 26, 2024

Honourable Minister of Finance, government officials, delegates and participants, I am pleased to present the Canadian Centre for Policy Alternatives Manitoba budget submission. 

The CCPA is Canada’s leading progressive research institute. We publish peer-reviewed research on a range of public policy issues.

We are deeply concerned by the decline in provincial own-source revenue collected by the Province of Manitoba which is compromising the province’s ability to make critical investments in public services and infrastructure. Below are points from our research that point to the need for increases in own-source revenue. 

Manitoba’s fiscal outlook going into Budget 2024/25:

• An MNP report commissioned by the Manitoba government released February 26, 2024 found that the massive cut to personal income taxes created a “high budgetary risk” essentially because the government would not see revenues as high as the previous year due to the known information about an economic slowdown.

• The same study found that the previous Manitoba government made commitments in the 2023/24 Budgets that create long-term obligations for the government in the form of remuneration increases and infrastructure capital spending.

• In December 2023, the Province of Manitoba released its second quarter fiscal update for 2023 – this fiscal update projected a $1.6 billion dollar deficit for 2023/24.

• Three reasons for the deficit:
  • 1) $610 million decrease in revenue from MB Hydro 
  • 2) $566 million increase in healthcare expenditure – higher salary and benefit costs resulting from wage settlements and increased overtime to cover staff shortages are driving these increases.  
  • 3) $420 million decrease in tax revenue – Actual tax revenue for 2022 was below the estimates used for Budget 2023 (-$264 million). Corporate tax, land transfer, tobacco, and fuel taxes (-155 million) decreases are also projected. 
• The causes for such a deficit – years of tax cuts that have starved the province of revenue
• Federal transfers to Manitoba are set to increase by $954 million in 2024/25. This will reduce the projected deficit, but will not eliminate it. The large deficit means new federal transfers cannot be used to expand public services or build new infrastructure such as housing.

The previous Mantioba government cut taxes for businesses via the Health and Social Levy and the base amount for corporate tax thresholds. Manitoba is the only province where businesses with profits below $500,000 do not pay any taxes. Businesses rely on a healthy, educated society to make a profit. They require infrastructure like roads and government services to do business. Businesses must pay their fair share of tax. 

Manitoba’s declining revenue and cuts to public services:

• Since 2016 there has been a close tie between tax cuts and cuts to public services.
  • Between 2016/17 and 2023/24, the former government cut $1.6 billion in provincial revenues (see Figure 1 below). Under the previous NDP government, $1 billion of revenue in the form of taxes was cut during the Doer era. 
• Budget 2023/24 income tax cuts disproportionately benefit high-income households – the top 10% of income earners will get more money from these tax cuts than the bottom 50% of tax filers combined. 
• The cut in Budget 2023/24 to the Education Property tax to 50% of the 2016 level cost the Manitoba government $314 million dollars, and there is still no plan to sustainably pay for education. It is positive that the Manitoba government has allowed school divisions to set property taxes. However, the province should reverse the cuts to property taxes as property values act as an approximation of wealth. For low-income and fixed income homeowners, a program could be developed to mitigate the costs of property taxes on homeowners. 
• Manitoba’s provincial revenue as a share of GDP is below where it was in 2007/08 and own-source revenues (revenue for provincial taxes and levies) are at their lowest since 2006/07 (Figure 2 and 3).
• Government revenues are scheduled to decline by 2.2 % in 2023/2024 and down again another 4.8 % in 2024/25. This is even with fiscal transfers and the bilateral health accord Manitoba recently signed (RBC). Revenues relative to GDP will continue to fall in Manitoba, from 25.6% in 2022/23 to 24.3% in 2023/24 to 22.5% in 2024/2025.
• Program expenses, for all public services like health care and education, per capita in Manitoba are scheduled to rise – from $12,736 per person in 2022/23 to $14,535 per person in 2024/25. This is in the right direction, program expenses, Manitoba should target at least the Canadian average of $15,315 per person.

Manitoba is unique and must have unique fiscal policies tailored to our needs 

• The chart comparing the basic personal amount across Canadian provinces published annually in the Manitoba Budget shows a huge variation. The rate in oil-rich Alberta is $21,000, but in BC’s rate remains at $11,981 and Ontario is at $11,865. Ontarians pay a health care premium of up to $900 per year, and the Ontario PST is set at 8%.
• As a smaller “have not” province, Manitoba does not have the revenue from business and economies of scale to provide government services at the same rates as provinces we are often compared to. While some mind argue Manitobans pay a higher comparative tax rate, we also have a much lower cost of living. 
• Tax cuts, which disproportionately benefit high-income households, are limiting the capacity of the provincial government to invest in public services. The Austerity in Manitoba research project finds that cuts in provincial departments are severely affecting public services, with some departments operating with 30% less staff than prior to 2016. 
• The previous government pursued an aggressive privatization agenda. Privatization is more expensive to taxpayers as profits are made from public services, and service gaps emerge. The new government has indicated it will abandon private out-of-province surgeries but is continuing the privatization of air ambulance services, for example. 
• Manitoba is heavily dependent on federal transfers, a potentially volatile income source. Federal transfers, some of which are intended to improve public services, are effectively displacing the revenue lost through tax cuts.
• A priority for this government is to restore funding to public services cut under the previous government. 
• Progressive taxation options are available
  • Reduce income tax thresholds to 2016 levels
  • Create a new high-income tax bracket
  • Increasing the corporate tax rate
  • Creating a mansions tax on homes worth more than $1,000,000
  • Reverse cuts to health and education tax levy
  • Eliminate school tax rebate 
  • The gas tax cut must end and be reinstated to at least 14 cents per litre
  • No more tax cuts

The affordability crisis is hitting Manitobans in need hard. Food bank use is up – more than 3,000 people year over year in January at Harvest Manitoba alone. More working poor are using the food bank, up from 18% in 2018 to 25% in 2023. We propose a suit of affordability measures needed for those most in need:

• In order to deal with the cost of living, targeted measures such as reducing or eliminating transit costs, funding interprovincial transit, increasing the thresholds for those receiving Rent Assist, eliminating fees for child care for low-income parents, eliminating school supplies and other school fees, and introducing a portable basic needs benefit for low-income people to boost EIA, set at the poverty line. The Rewarding Work program should be enhanced so that low-income people do not have barriers in benefits to seeking work. 
• Resource the Right to Housing’s Social Housing Action Plan for Manitoba 
• This along with making the minimum wage a living wage will greatly enhance income for the working poor. 
• The Manitoba government must also urge the Federal government to act quickly on pharmacare so that those on fixed income who rely on the Manitoba pharamcare program do not pay high deductibles for eligible drugs, or out of pocket for drugs not on the formulary. 

Health Care 

• The new bilateral health accord brings in needed money for health human resources, home and long-term care. This money, alongside the $500 million the NDP committed to health care in the provincial election from the contingency fund are needed after years of cuts and below-inflationary increases to health care in Manitoba. 
• The reliance on agency nurses and other private providers is costly to the Manitoba government. We were pleased that Mantioba canceled out-of-province private surgeries, choosing to instead invest in local surgical capacity. The priority must be to build up the healthcare system locally via staffing and reversing years of under funding and cuts. 
• The recent announcement of the federal coverage for birth control and diabetes is welcome. Manitoba should use provincial money earmarked to these services to enhance access to reproductive health care via improving access to therapeutic abortions for those in rural and northern Manitoba rather than relying on the federal money to backfill provincial commitments. 
• In 2023 we published a report entitled Revitalizing the Conditions of Care: supporting long-term care and home care workers in the recovery from COVID 19. Over seven hundred residents of long-term care died of COVID-19 related illness while hundreds of clients who rely on home care experienced care cancellations. Through a survey of 1027 unionized workers in Manitoba’s continuing care system (long-term care and home care) we investigate the conditions of work in the sector three years on from the outbreak of COVID-19. We find that the outsized burden placed on continuing care workers by the pandemic has not been lifted and, in many ways, has gotten heavier. Significant investments in the conditions of care work are still required to ensure Manitobans have access to the quality, safe care they depend on. 
• This report recommends the Manitoba government raise daily hours of care to 4.5 HCPD at a cost of $128 million. We welcome the Aging with Dignity portion of the federal bilateral health agreement with Manitoba which provides funding to hire staff sufficient to achieve 4.1 HCPD in provincial non-profit long-term care facilities. The research is clear that at least 4.1 HCPD dramatically improves patient care while protecting staff from the harmful working conditions that come from working short, which ultimately lead to burnout . However, emerging research indicates that 4.5 HCPD is now the safe threshold to care for residents in facilities where patient acuity is increasing. We call on the minister of Health, Seniors, and Long-Term Care to continue working with RHAs to increase HCPD to 4.5. 
• Hire 800 more HCAs/HSWs across the home care system: To reduce wait times for new home care clients, and to ensure clients are receiving the full care they require, more staff must be added to the home care system. The 2016 Future of Home Care Services report was clear that 90-100 new HCAs/HSWs must be hired annually to meet growing demand and higher acuity clients as a result of population aging. Access to information requests indicate that home care funding and hours of care have in fact declined since 2016. We welcome the addition of funds for the Self and Family-Managed Care program through the bilateral health agreement, however more funding must be made available to bolster Manitoba’s public home care system. 

Indicators 

The Manitoba government should develop indicators of wellness for Manitoba to gauge progress. Currently, the deficit receives an inordinate amount of attention in the mainstream when the public is informed about the status of the government’s progress, or not, serving the public. The Manitoba government should look to the a suite of indicators such as the United Nation’s Sustainable Development Goals or the Canadian Index of Wellbeing developed by the University of Waterloo. 

Thank you for your time and attention.