Budget 2016 - Province of Manitoba...16 Manitoba’s Budget Plan Manitoba is leading economic growth because of provincial support to business, communities, families and infrastructure
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Budget 2016
Pre-Budget
Consultation Meeting
Fall 2015
Agenda
Canada and the Global Economy
Manitoba’s Economic Performance
Manitoba’s Budget Plans and Our Balanced Approach: Focused on What Matters Most
Manitoba’s Provincial Finances and Fiscal Position
Challenges: Economic and Fiscal
Your Advice
2
Sources: Statistics Canada, Manitoba Finance and IMF
Canada
Global
Canada and the Global Economy
3
-4
-3
-2
-1
0
1
2
3
4
5
6
2008 2009 2010 2011 2012 2013 2014f 2015f 2016f
Real Annual GDP Growth: Canada and Global (%)
Canadian and Global growth has
slowed since 2011
Low oil price impacting Canadian
growth
Sharp drop in energy sector
investments
Canadian labour market activity
slowed in 2014
Low dollar and strengthening
U.S. expected to improve exports
• “we expect global growth to remain
moderate and likely weaker than we
anticipated last July [2015]” Christine Lagarde, Managing Director International Monetary Fund , September
2015
• “increased public infrastructure
investment raises output in both the
short and long term...the time is right for
an infrastructure push” The International Monetary Fund – World Economic Outlook, October 2014
Global Economic Uncertainty
4
Manitoba’s Economy
5
The Manitoba Economy
Most stable growth among Canadian provinces
Diversified economy with major presence in manufacturing, mining, construction,
transportation, wholesale trade, finance and insurance, agriculture
Balanced export market: roughly 50% international, 50% rest of Canada
Broadening foreign markets: increasing exposure to growing global regions
33% sent to non-U.S. markets
Most consistent growth in capital investment among provinces
Third fastest population growth in Canada
3.9
-0.3
2.6 2.3 2.7
2.4 2.4
2.0 2.4 2.5
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f
Canada
Manitoba
f – Forecast based on Manitoba Finance survey of economic forecasters
Sources: Manitoba Bureau of Statistics, Manitoba Finance, Statistics Canada
Manitoba growing above the national average in medium-term
6
Stable and Steady Economic Growth
(Real GDP Growth 2008-2017F)
Strong Economic Performance in Canada
(2015 -2016 Combined Growth (%))
Sources: Manitoba Finance Survey of Economic Forecasts
2.5 2.3 2.2
1.9 1.8 1.7
1.4 1.3 1.2
0.5
-0.8
BC ON MB QC CA NS PE NB SK AB NL
Manitoba among growth leaders in 2015 and 2016
7
Sources: Statistics Canada
2.0 1.8
1.0 0.9
0.7 0.6 0.5 0.1
-0.7 -0.8
-1.2
-2.0
-1.0
0.0
1.0
2.0
3.0
MB AB QC Can ON SK BC NS NB PE NL
Manitoba leads the country in employment growth in 2015
8
Sound Labour Market
(Year-to-date 2015 Growth (%))
Source: Statistics Canada 9
Rebuilding Manufacturing Capacity
50,000
55,000
60,000
65,000
70,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
Manufacturing Employment, 2007-2015 YTD (Number of Workers)
Good Jobs created since the Great Recession
Strong increase in income
(2014 Annual Growth (%))
4.3 4.0
3.7 3.4
3.1
2.8 2.8 2.6
2.4
2.0 2.0
MB NL AB NB SK NS PE Can BC QC ON
Average weekly earnings growth: Best in Canada in 2014
10 Source: Statistics Canada
Business Confidence
Source: Statistics Canada
11
1,000
1,500
2,000
2,500
3,000
Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Jan-15
Building Permits, Jan 2008 – June 2015 (12 Month Moving Average in Millions of Dollars)
Strongest growth in Building Permits in the Post Recession
Period
Manitoba: Head Office Hub
10.3
8.7 8.6 8.4 8.1 8.0
7.1 7.0 7.0 6.8
AB MB SK ON Can NS QC NB BC NL
12
Number of Head Offices per 100,000 Population
Source: Statistics Canada
Manitoba ranks second for highest number of head offices per capita
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6 Population Growth, 2001 Q1 – 2015 Q1 (Year-Over-Year Quarterly Growth in Percent)
13
Source: Statistics Canada
Strongest growth in over 50 years
Continuous Growth in Manitoba Population
14
Solid Household Finances
Sources: Canadian Bankers Association,
NY Federal Reserve
Sources: Bank of Canada, Manitoba Finance
-
10,000
20,000
30,000
40,000
50,000
60,000
Personal Debt per capita 2014 ($)
0.24 0.29
3.02
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
MB Can USA
Mortgage Arrears Delinquency Rate
(90+ days) 2014 (%)
Lowest personal debt
per capita
Steady Growth Good Jobs
Given slow and uneven economic growth in Canada and globally, our plan has been to:
Provide a balance between delivering public services and supporting the economy with improved infrastructure for ongoing business productivity improvements.
Build Manitoba’s economic strengths and continue to support job creation, protect services for families, invest in training for careers here at home and improve infrastructure across the province.
15
Manitoba’s Budget Plan
16
Manitoba’s Budget Plan
Manitoba is leading economic growth because of provincial support to business, communities, families and infrastructure
Without provincial investment, the economy might have experienced a hard landing as in other jurisdictions
During economic uncertainty, abruptly cutting off economic support could lead to a major slowdown and job losses in Manitoba
Provincial support includes balanced investment in:
Productivity improving core infrastructure: Efficient and safe roads, highways and bridges
Municipal Infrastructure
Flood and fire mitigation investments
Health, Education and Family Services
Business competitiveness (lowering taxes)
Family affordability (lower utility bundle)
Our Budgets demonstrate a balanced approach by focusing on:
• Supporting economic growth and the creation of new job opportunities
• Managing government spending growth to the same as economic growth
• Reducing the deficit while continuing to invest in vital front-line services
• Continuing to streamline government services by expanding the use of lean processes in core government departments
• Maintaining affordability to keep Manitoba one of the best places to live, work and raise a family and retire
17
Our Approach: Focus of What Matters
Most to Business and Families
Manitoba has significantly reduced business taxes:
• Corporate Income Tax Rate down from highest in Canada in 1999 to a competitive 12%
• Eliminated the Small Business Income Tax Rate from the highest in Canada in 1999 to the only jurisdiction with no income tax for small businesses.
• Increased Research and Development Investment Tax Credit to 20%
• Increased and broadened the Manufacturing Investment Tax Credit by including investments in new and used buildings and equipment
• Introduced generous credits to hire high school, post-secondary students, apprentices and certified journey persons
• Encouraged youth retention through tuition fee rebates and employer hiring incentives
18
Supporting Business
17.0 17.0 17.0 16.5 16.0 15.5 15.0 14.5 14.0 13.5 12.5 12.0 12.0 12.0 12.0 12.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Lowering corporate
income taxes
19 Source: Manitoba Finance.
Corporate Income Tax Rate, Large (%), 1999-2014
Manitoba’s Business Competitiveness
8.0
7.0
6.0
5.0 5.0 5.0 5.0 4.5
3.0
2.0
1.0 0.9
0.0 0.0 0.0 0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20
Manitoba’s Small Business Advantage
Corporate Income Tax Rate, Small (%), 1999-2014
Source: Manitoba Finance.
Only province to eliminate Small
Business Tax
21
Improving Government Efficiency
Merged the Manitoba Liquor Control Commission and Manitoba Lotteries Corporation to reduce overhead and regulatory costs
Expanded LEAN practices to increase productivity and lower costs
Reduced the number of regional health authorities to 5 from 11 to streamline services
Reduced the number of government-appointed agencies, boards and commissions
Reduced the number of School Boards
Reducing government footprint:
Reduced Civil Service by 600 workers
Reduced total office space by 140,000 square feet
Supporting Families
• By cutting taxes and introducing new tax credits, Manitoba families will save $900 million this year
• For an average family of four, this means $4,272 in savings this year on their income and property taxes
Tax Savings for Manitoba Families
Income and Property Tax Savings:
Income Tax Exemption up 34%
Property Tax Savings:
All households now save up to
$700 up from $250
Seniors can save up to $1,570
with increased Seniors' School
Tax Rebate
New Tax Credits and Rebates:
Tuition Fee Rebate
Primary Caregiver Tax Credit
increased to $1,400
Fertility Tax Credit ($8,000)
Children's Arts and Cultural Activity
Tax Credit
New Volunteer Firefighters’ and
Search and Rescue Volunteers’ Tax
Credit 22
Manitoba’s Affordability Advantage
• Affordability makes Manitoba a great place to live, work and raise a
family
• Deloitte has confirmed that Manitoba has the lowest total costs for
home heating, hydro and auto insurance in Canada:
• The average household saves $2,095 per year compared to
the national average
23
Source: Deloitte audit
$-
$2,000
$4,000
$6,000
$8,000
MB QC SK BC CA AB NB NF NS PE ON
Combined Annual Cost of Home Heating, Hydro and Auto Insurance
Provincial Finances: Budget 2015
24
Core Government Balanced Financial Strategy 2014/15 2015/16 2016/17 2017/18 2018/19
Forecast Budget Projection Projection Projection
Revenue 12,078 12,354 12,768 13,231 13,770
Expenditure 12,546 12,865 13,181 13,496 13,816
In-Year Adjustment/Lapse* (17) (70) (70) (70) (70)
Net Results (451) (441) (343) (195) 24
Fiscal Stabilization Account Draw 0 (20) (15) (10) 0
Surplus/Deficit (451) (421) (328) (185) 24
Balanced and Measured Approach
Multi-year fiscal planning with prudent economic and fiscal assumptions to maintain a strong financial profile
* In-Year Adjustment/Lapse could be an increase in revenue and/or decrease in expenditures
Source: Province of Manitoba; Public Accounts, Budget 2015
Fiscal Position
25
Sources: Provincial budget documents. PE has not tabled a 2015 Budget
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
AB SK BC MB FED PEI NL NS NB ON QC
Net Debt-to-GDP Ratio, 2015/16B (%)
Fourth lowest net debt ratio compared to other provinces and federal government
26
Income Taxes, 25.7%
All Other Taxes, 12.2%
Fees & Other Rev., 14.3%
Net Income of Govt Business
Enterprise, 5.1%
Federal Transfers, 26.0%
Sinking Funds and Other Earnings, 1.4%
General Sales Tax, 15.3%
Source: 2015 Manitoba Budget
Health, 39.2%
Education, 24.4%
Family Services & Housing, 7.4%
Debt Servicing, 5.4%
Other Programs, 23.6%
Revenues Expenses
Revenue & Expenditure Profile
27
Balanced Budget Legislation
Manitoba implemented Balanced Budget Legislation (BBL) in the post recession recovery of the mid 1990s.
It was intended to prevent deficit financing.
In the fall of 2008, a financial crisis sent shockwaves through the global economy. Around the world, jobs were lost and many families saw their savings disappear.
Around the world, economic pressures forced governments to wrestle with the challenge of protecting services and restoring economic growth while facing budget shortfalls.
Following the original Balanced Budget Legislation would have worsened the impact of the recession on Manitoba - public services would have been cut, jobs would not have been created and infrastructure would have continued to crumble.
28
Balanced Budget Legislation
The global and Canadian economies continue to be hard hit by consumer uncertainty, low oil prices, global terrorism, trade issues, weather disasters and the declining Canadian dollar.
Manitoba has consulted with economic experts who believe:
Deep spending cuts when the economy is weak would lead to lay-offs, unemployment and reduced retail and housing activity
Economic conditions would get worse in Manitoba with cuts
Spending on core infrastructure when interest rates are at record low levels will support the economy, grow assets, with low cost
Our Balanced Approach
Investments to Support Growth & Create Jobs
Five-Year Plan to Build a Stronger Manitoba
Manitoba’s $5.5 billion Five-Year Plan to build better infrastructure
more than matches every dollar raised from the one-cent on the
dollar increase in PST with new investments in core infrastructure
including:
Roads, Highways and Bridges: More than $3.7 billion will be invested in Manitoba roads,
highways and bridges to better connect communities and
strengthen trade corridors.
Flood Protection: $320 million will be invested in flood defences to better
protect more communities from flooding.
Municipal Infrastructure: More than $1.5 billion will be invested in municipal roads,
clean water, active transportation and other municipal
infrastructure to help meet the needs of Manitoba’s many
growing communities.
29
30 Source: Conference Board of Canada
Building Infrastructure Creates Jobs
Challenges:
31
Global Economy Remains Uncertain
Slower than expected growth in the U.S. economy; stalling of the fragile economic recovery in the euro area; and further slowing in China.
Prolonged low oil prices could have larger implications on interprovincial trade.
Weather and commodity price volatility can quickly change the economic and financial market outlook.
Declining Support from Federal Government
Federal transfers to Manitoba for health, education and other frontline services have remained flat while other provinces have seen increases.
Federal government has offloaded costs and responsibility for several services to provinces.
Canadian Provincial Government Budget Concerns
Growth remains uneven and demand for public services and infrastructure increase.
Cost Pressures in Providing Services for Manitobans
Continue to see cost pressures in health care, education, family services and policing.
Your Advice is Valued
• What government services are most important to
you?
• Where do you think we can find efficiencies and
savings?
• What should government priorities be?
• What can government do to help grow the economy
and create good jobs?
32
Thank You
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