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