Heading into a tariff year, Manitoba banks on growth while forecasting decline

At Manitoba's current rate of deficit reduction, it will take the NDP government 397 years to balance the provincial budget.

Technically speaking, this is not a joke. Manitoba's spending plan for 2025-26 calls for the province to post a $794-million deficit at the end of the coming fiscal year, which is $2 million less than the deficit target in the budget for 2024-25.

If this pace continues, Manitoba will be able to achieve fiscal balance by the year 2422. 

This is of course a joke even though the arithmetic is sound. But it would be fair to describe the math behind Manitoba's actual deficit-reduction plan as less sound.

On Thursday, Manitoba Finance Minister Adrien Sala said his government still intends to balance the budget by the 2027-28 fiscal year.

That's the same target Sala set last year, when he budgeted for a $796-million deficit that is trending closer to $1.2 billion by the time the end of March rolls around.

In other words, this province has moved $400 million farther away from its deficit-reduction target and now has one less year to reach it.

But wait, there's more, as the old K-Tel Commercials used to say. (Easter may be one month away, but yes, this is an Easter egg).

The $794-million deficit Sala foresees for the fiscal year ending on March 31, 2026, is something of a best-case scenario for Manitoba. If U.S. and Chinese tariffs on Canadian goods continue, Manitoba's deficit for the coming year may end up closer to $1.9 billion, thanks to diminished economic activity and emergency support for tariff-affected businesses and workers.

Nonetheless, Sala remains undeterred in his effort to charge his horse against the deficit windmill.

"We are still committed to balancing the budget and we're going to do that," Sala told reporters during the budget lockup, insisting savings may be found by reducing spending on health-care administration.

Given the economic uncertainties facing Canada, which include Donald Trump's probably pyrrhic trade war against the planet, Xi Jinping's far more calculated tariffs and a host of worldwide geopolitical disasters that would be too terrible to contemplate if they did not already exist, one could argue against the wisdom of making a balanced budget a priority this year of all years in Manitoba.

But here we are, with a finance minister doubling down on deficit reduction even as he contemplates the very real possibility of an enormous deficit increase.

But wait, there's even more. Deficit reduction isn't the only facet of the 2025-26 budget that appears to contradict economic reality.

The NDP government's second budget calls for spending to increase this coming year by $1.7 billion, with spending on health care up almost $1.2 billion alone.

University of Winnipeg economist Philippe Cyrenne suggested this is a bold move at a time when Canada is bracing for what may be the most painful economic crisis since the first few months of the COVID-19 pandemic.

"It's almost admirable to see the courage that this government has in terms of spending," Cyrenne said Thursday. "You know, health care is their priority and they're willing to go down with the ship, in some sense."

The fuel for this spending is expected to come from increasing provincial revenues — including some revenue streams that tend to increase only when economic times are good.

For example, the 2025-26 budget calls income tax revenue to rise eight per cent in the coming year, generating $446 million more for Manitoba's coffers.

The budget also envisions the provincial sales tax will rake in an additional $178 million, which amounts to a rise of 6.5 per cent.

In other words, Sala is banking on Manitobans earning more and spending more in a year when the economy is widely expected to face challenges.

Cyrenne said he wonders whether the bulk of this budget was devised well before Trump began musing about the greatest, most beautiful tariffs ever.

"It looks like when they put the budget together, they were on the optimistic side," the economist said of provincial finance officials. "I don't think any of these recent political events have been entirely incorporated."

Adrien Sala would not be the first Manitoba finance minister to suffer from an inability to pivot when disaster looms, if indeed that is what just happened.

In February 2020, as the victims of the first wave of COVID-19 started filling Italian morgues, former Manitoba Progressive Conservative finance minister Scott Fielding said he was not concerned about the financial impact of this strange new virus on these shores.

To be fair, no one outside the field of epidemiology expected a pandemic that would linger for several years. There was no economic playbook to prepare a government for COVID.

Similarly, Sala and Manitoba finance officials don't have a playbook for the situation in which Canada suddenly finds itself, where what used to be our closest ally and neighbour has suddenly decided to betray us at the same time our Asian superpower of a frenemy is flexing its muscles as well.

"In fairness to the people putting the budget together, things have been changing so quickly and the forecasts are going to be revised downward if these tariffs do come through," Cyrenne said.

"Trying to budget in these times is very, very difficult. And I think if the budget looks like it's overly optimistic, it may just be a function of the times changing adversely from when they started putting the budget together."

Premier Wab Kinew declined to speak to reporters on budget day, though he did take time to post a video on Instagram. The premier left it up to Sala to wear this budget on his own.