12/20/2016 11:18 EST | Updated 12/21/2017 00:12 EST

Revised deficit forecast shows more red ink for Manitoba government

WINNIPEG — The Manitoba government's deficit continues to climb, despite promises from the new Progressive Conservative government to start whittling away at the red ink.

The deficit for the fiscal year that ends in March is now forecast to be just over $1 billion — up $93 million from what was originally budgeted last spring, according to the government's second-quarter fiscal report issued Tuesday.

The figure is also up some $160 million from last year's deficit.

Revenues from sales, payroll and tobacco taxes are all running lower than expected — signs of a sluggish economy.

"Slower than expected economic growth in the U.S., Canada, Japan and many European countries, combined with the U.K.'s vote to exit the European Union, have all contributed to a weaker economic outlook for advanced economies overall," the report stated. 

"These developments, particularly in the U.S. and Canada, are reflected in a downward adjustment to the ... economic growth projections for Manitoba."

The province's projected growth rate for 2016 has dropped to two per cent from 2.2 per cent. It's above the national projected rate of 1.3 per cent.

Other contributing factors to the bigger deficit are higher-than-expected spending in areas such as employment and income assistance programs. Revenues from two Crown corporations — Manitoba Hydro and Manitoba Public Insurance — are down.

The extra red ink comes at a time when Premier Brian Pallister is looking to control costs and fulfil elections promises to restore the province's finances following a credit-rating downgrade last year under the previous NDP government, which had run consecutive deficits since 2009.

Pallister's Tories were elected on a promise to balance the budget within eight years and reduce the provincial sales tax to seven per cent from eight by 2020.

Finance Minister Cameron Friesen said the government remains committed to its goals and is eyeing cost-saving measures through an ongoing value-for-money audit of programs and services.

He said one program being examined is Rent Assist, which helps low-income earners with housing costs and has seen costs rise sharply.

"We want to make sure that that program is actually doing what it is designed to do and we have some concern about that," he said.

"There has been a significant increase in the subscription inside Rent Assist and we need to determine all the factors for that."

The government estimates about $24 million will also be saved by reviewing and possibly postponing some capital projects.

"Our government remains committed to fixing the finances of our province, which for too long has seen unsustainable growth in spending and a lack of fiscal discipline under the previous administration," Friesen said.

"Our government is leading by example to ensure that Manitoba returns to a firm fiscal foundation and we expect Manitoba’s Crown corporations to demonstrate the same commitment to fiscal sustainability through a careful and considered analysis of their operations going forward."

The New Democrats accused the Tories of planning cuts to key programs and hurting the economy.

"The Pallister government needs to take responsibility for its actions. It should not shift its failures onto the backs of Manitoba families and front-line workers," the NDP said in a written statement.

"Today’s financial report is more evidence that the government needs to let go of its ideological commitment to austerity. It needs to make smart, strategic investments that will create good jobs for Manitoba families."

The final deficit calculation for this year will come in the summer once the auditor general reviews year-end results.