New bill sets stage for Manitoba to run deficits without cabinet pay cuts

Scaled-back balanced budget law gets some teeth back

The Manitoba government's new balanced-budget bill does not make cabinet ministers take a pay cut if the province runs a deficit, but it may penalize them if they run a large enough deficit.

Bill 21, the proposed fiscal responsibility and taxpayer protection act, replaces a balanced budget law that the Progressive Conservative government scrapped after winning the provincial election last year.

"Manitobans are well-served by a bill that makes government behave the same way that a family in their household finances would behave: living within their means or having consequences," Finance Minister Cameron Friesen said after tabling the bill on Monday.

The old law required cabinet ministers to take a 20 per cent pay cut any time the government was in deficit.

The new bill only requires the government to run a lower deficit than the previous year to avoid the penalties, which start at 20 per cent and go up to 40 per cent if there are deficits for two years in a row.

But if the deficit is a dollar less than in the previous year, the penalties would not apply.

The bill contains no timeline for balancing the budget.

"You must go lower every year … if you go backwards, if you regress, there will be the penalty in place," Friesen said.

"I think part of this is recognizing that we were left with an enormous challenge as Manitobans — an almost $900-million deficit [under the former NDP government]."

The penalties would not apply to newly appointed cabinet ministers in their first fiscal year, or ministers appointed following a change in government.

The Opposition New Democrats accused the Tories of protecting their own pockets after announcing a series of spending cuts in recent weeks that include health-care capital projects.

"They don't seem to be willing to accept a cut to their own salaries which, to me, shows a lack of leadership," said NDP MLA Wab Kinew.

Changes deficit calculation

The bill also changes the way the deficit is calculated for the purposes of the pay cut.

The government says expenses related to natural disasters would not count toward the deficit tally, as well as any expenses occurred if Canada is at war.

The tally also won't include Manitoba Hydro's net income or loss, or any reduction in revenue because of a decision made by another level of government regulatory agency that takes effect after the budget is tabled.

As well, the government could take money from its so-called rainy-day fund and have it counted as revenue.

The bill reinstates a requirement under the old law to hold a referendum before any major tax increase, although it contains no penalty for governments that violate that provision.