The Manitoba government will move aggressively this year to start phasing out the province’s education property tax, according to its latest spending plan.
The 2021-22 provincial budget, released Wednesday, says the government will slash the education tax for owners of residential and farm property by 50 per cent in the next two years — 25 per cent this year and another 25 per cent next year.
Landowners with other types of property should expect a 10 per cent cut in their levy this year.
The Progressive Conservatives initially promised during the 2019 provincial election campaign to gradually eliminate school taxes from property tax bills, which they projected would take 10 years.
At that point, Premier Brian Pallister said the government would start eliminating the levy in 2023, after balancing the budget in 2022. The promise of a balanced budget, though, was delayed by the COVID-19 pandemic.
At a Wednesday news conference, Finance Minister Scott Fielding said his government felt it needs to move ahead with eliminating the education property tax regardless.
“We thought it was important to supercharge the tax relief position earlier, not just for residential properties but also for farmland and commercial,” Fielding said.
The province will begin its plan by sending out rebate cheques as early as June.
It’s expected an average homeowner will save $210 this year through a combination of the rebate and reductions in the existing education property tax offsets. The net cost of the program will be $151 million this year.
In its sixth budget, the Progressive Conservative government is still coping with a pandemic weighing heavily on its finances, all while offering tax relief and avoiding major cuts to government departments.
Pallister brushed aside any suggestion that offering significant tax cuts during the economic uncertainty caused by COVID-19 is risky.
WATCH | Premier Brian Pallister on why his government is cutting education property taxes in the midst of a pandemic:
“I think it’d be risky not to,” he said at a post-budget news conference. Creating “a more fair tax environment” is one way to help address the “significant realities” of the pandemic, he said.
The government is looking to bounce back on the heels of strong economic growth. Real gross domestic product (GDP) is projected to grow by 4.1 per cent in the coming year, followed by 3.6 per cent in the subsequent year, according to budget documents.
The province is planning to whittle down its 2021-22 budget deficit by around $400 million, to a forecast $1.6 billion, but it will remain the second-highest shortfall in Manitoba’s history.
COVID-19 spending down
Manitoba’s total debt is expected to rise to $30 billion, up $2.4 billion from the year prior.
Total provincial spending is projected to fall around $500 million to $19.44 billion, mainly due to a $800-million drop in expected COVID-19 spending, to $1.18 billion. The new pandemic costs will be divvied up among public health, improvements to the health-care system and the vaccination campaign.
The province is expecting an increase in sales tax revenue, in part because Manitoba will apply the provincial sales tax to streaming services, online accommodation platforms and online marketplaces.
The impacted businesses will include streaming services like Netflix and Spotify, online accommodation providers like Airbnb, and online marketplaces like Etsy. Those measures take effect in December.
At the same time, the government will remove the seven per cent PST on personal services such as haircuts and salon visits, reduce vehicle registration fees by an extra 10 per cent and lower payroll taxes for small businesses, which the budget says will offer savings for 1,100 employers.
The province plans to pass along some of the savings from landlords paying reduced school taxes on to tenants.
Residential rent increases will be capped at 1.6 per cent this year, but set at zero per cent for the next two years, the budget promises. Property owners can still apply for higher rent increases if they’ve made improvements to the property.
The budget documents say the phase out of school taxes will not result in a cut to education funding. The province will dip into general revenues to cover education needs.
Manitoba will also move to revitalize a downtown Winnipeg landmark by creating a $25-million trust to develop the now boarded-up Hudson’s Bay Building on Portage Avenue. Fielding is encouraging other governments to chip in.
The biggest budget winners include the health and mental health departments, which will see a 2.3 per cent increase bring their combined budget to $6.98 billion. The highlights include $50 million to cut the surgery backlog stemming from the pandemic and an additional $23 million to advance cancer treatments.
But the leader of the Official Opposition says the budget shows the province hasn’t learned the hard lessons from the second wave of the pandemic, as Manitoba’s hospitals were strained by a surge in COVID-19 cases.
“You have cuts, you have underfunding, you have freezes” in the latest budget, said NDP Leader Wab Kinew.
“What you don’t have is action to make our health-care system stronger and more resilient … and you don’t have that investment in the education system to ensure that every child can succeed,” he said.
“The government has not learned the lessons that every other Manitoban picked up over the past year.”
Help for kids with diabetes
Other budget promises include continuous glucose monitoring devices for eligible children and young adults under the age of 25. It will also expand the age eligibility for the insulin pump program from up to 18 years of age to 25.
The province will boost education spending by $70 million for a total of $3.07 billion.
Teachers can also now claim a 15 per cent refund for up to $1,000 worth of teaching supplies they buy on their own.
Asked if he’s bothered some teachers are paying out of pocket for school supplies, Pallister said it shows initiative.
“I think this is a good, fair incentive to encourage other teachers to do the same.”
To help Manitoba through the pandemic, the budget includes $50 million in grant funding initiatives to more than 40 specified businesses, ranging from food production companies to the aerospace sector.
There’s also $62 million to help Manitobans re-enter the workplace. The funding will offset the costs of training employees and help develop a digital program to provide training, mentorship and coaching for small businesses.
But the budget’s focus on tax cuts offers little for Manitobans who most need financial relief, Liberal Leader Dougald Lamont said.
“It’s overwhelmingly geared to helping people … who don’t need help, while completely denying help for people who really need it,” he told reporters Wednesday afternoon.
His party also called on the finance minister to offer more help for school divisions facing increased costs due to COVID-19.
“We do not see that commitment. There should have been a commitment to make sure they can actually cover their costs,” Lamont said.
On child care, the province will fund the creation of 149 new licensed spaces, in addition to 50 more home-based spaces.
Recipients of the Rent Assist program, which help low-income renters pay for private housing, will see an increase in benefits of anywhere from 2.4 per cent to 11 per cent.
The government is also promising to create a Manitoba Criminal Intelligence Centre, which it says will “disrupt criminal activity and prevent crime.”
Passage of time will show budget impact on City of Winnipeg
The City of Winnipeg asked for three things of the Manitoba government in the 2021-2022 budget: maintain and confirm $273 million in funding to the city, endorse the city’s usage of federal funds for proposed Winnipeg Transit projects and confirm that there will be no more delays in needed development of the North End Sewage Treatment Plant.
The city did not receive full confirmation on any of those asks yet, said Winnipeg Mayor Brian Bowman during a news conference Wednesday.
The city has received confirmation that it will receive $224.5 million in provincial funding, but $48.5 million is still outstanding because there has yet to be a formal contract created for ambulance services, said Bowman.
“We provide those services as a contractor on behalf of the provincial government,” he said. “That $48.5 million will require further confirmation from the province that they’re going to be paying their bills.
“We’re going to have some more discussion with them on the operating and the capital funding that we’re relying upon.”
Some provincial ministers have generally expressed approval of some of its initiatives, such as electric buses. But the Manitoba government did not confirm Wednesday that it would back the city in securing millions of federal dollars earmarked for public transit projects, said Bowman.
The City of Winnipeg has also not received confirmation that its October 2019 request for federal funding for the first two phases of the North End Sewage Treatment Plant was sent to Ottawa, said Bowman.
The Manitoba government did confirm that it will provide more funding to the city for the project, however.
“We’ll have additional dialogue with the provincial government to try and reconcile that,” said Bowman.
“We are long past the time where those delays should be acceptable to Manitobans, so we’ll continue to press them on that.”
City staffers were still leafing through the budget documents when Bowman spoke with reporters. But ultimately the impact of the provincial budget on the city’s budget and operations will need time to show itself, he said.