April 16, 2013 / 9:21 PM / 4 years ago

Manitoba forecasts fifth straight budget deficit

Canada's Prime Minister Stephen Harper announces funding for a second phase of cleanup for Lake Winnipeg in Gimli, Manitoba August 2, 2012. REUTERS/Fred Greenslade

WINNIPEG, Manitoba (Reuters) - The Western Canadian province of Manitoba forecast a budget deficit of C$518 million ($506.03 million) on Tuesday for its 2013-14 fiscal year, its fifth-straight deficit, as it warned of the costs of potentially major flooding this spring.

Manitoba, whose economy depends in part on farming and mining, projected spending at C$14.8 billion and revenue of C$14.2 billion, both up 3 percent from 2012-13, and said it would raise the province’s sales tax. The deficit calculation takes into account some C$150 million that is budgeted but not expected to be spent.

Manitoba’s left-leaning New Democratic Party government, led by Premier Greg Selinger, is aiming to balance the budget by 2016-17.

Finance Minister Stan Struthers said the twin threats of a weak global economy and spring flooding left Manitoba with a choice of raising taxes and fees or making deep spending cuts.

The province has budgeted C$135 million in total to cover holdover expenses from past floods and possible damages from any floods this year. In 2011, the total cost of fighting floods and compensating property owners was about C$1 billion -- around half of which the Canadian government paid.

“We can’t stick our heads in the sand and pretend there’s no flood,” Struthers said. “We can’t pretend we don’t have to pay for it.”

Cold weather has delayed the snow melt in Manitoba, raising the risk that it will later melt suddenly. The Red River runs north into Manitoba from North Dakota and Minnesota, which have received heavy snowfall this winter, while the Assiniboine River runs east into the province from Saskatchewan, which also has plenty of snow left to melt.

The budget includes a 1 percentage point increase in the provincial sales tax, bringing it to 8 percent, to provide additional dedicated revenues for infrastructure, including flood-mitigation measures, over the next decade. Manitoba law requires a public vote to approve a tax increase, but Struthers said the government would pass legislation to waive that requirement.

Manitoba’s net debt stood at C$16.1 billion as of March 31, and is forecast to rise to C$17.8 billion a year later.

Manitoba expects to finish the 2012/13 fiscal year with a C$583 million deficit, an amount that is just over half the record-high C$999 million deficit it had a year earlier.

Most Canadian provinces have run deficits for several years after the 2008-09 financial crisis slowed the economy. Neighboring Saskatchewan, rich in potash and crude oil, is an exception.

($1=$1.0237 Canadian)

Editing by Leslie Adler

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