Capital Investments

Manitoba’s investments in schools, health care, highways, housing, municipal infrastructure and other capital assets provide multiple benefits to society. These strategic investments provide an immediate economic stimulus, generating jobs and boosting the incomes of Manitobans.

These investments also provide long-term social benefits of making communities more resilient, Manitoba more competitive in the global market, healing health care, protecting the environment and parks, and advancing productivity and wellness.

This year’s multi-year capital investment plan follows best practises in Canada and has been expanded to a five-year plan which is able to provide a more strategic outlook of future year priorities and commitments.

As witnessed in the past two years, capital delivery has been made more difficult by unprecedented inflation and supply chain issues due to a pandemic, and geo-political instability; this is in addition to weather and climate challenges.

This change to a long-term plan will provide targets to ensure government stays on track in uncertain times on needed strategic infrastructure commitments and provides transparency to Manitobans. This will also help our construction industry, by ensuring they are better able to plan for labour or equipment needs in upcoming years.

The five-year plan is ambitious, with a total investment of over $14-billion in strategic infrastructure planned over five years, and more than $3-billion in strategic infrastructure spending planned for 2023/24.

Five Year Capital Plan, 2023/24 - 2027/28

Building from the three-year capital plan in Budget 2022, the 2023/24 budget expands the multi-year capital plan to five years. The overview of the five-year capital plan is included on the table and graphs below and a listing of major projects in planning or delivery stages in 2023/24 is attached in Appendix: Manitoba Capital Highlights on page 73.

Work is well underway to develop and maintain a government-wide inventory of the condition of assets that will facilitate better prioritization of capital investments and proactive asset management.

This plan provides funding for new and ongoing projects to address essential infrastructure needs, stimulate economic recovery, and ensure Manitoba’s continued success.

Capital Infrastructure Investment Plan

Handling Uncertainty and Capital Plan Modernization

As the province develops long-term capital plans, it is important to recognize that capital projects take years to complete, and there can be unforeseen challenges to some projects that result in delays while other projects experience hurdles due to inflation.

Planned appropriation legislation will allow for capital expenditure authority that would otherwise lapse to be redirected towards priority areas such as school construction, the construction of health facilities in our communities, highway and road construction, and building social housing.

Capital Infrastructure Investments in the Five-Year Plan

The following investments are included in the five-year capital plan by government departments.

Manitoba Consumer Protection and Government Services

Capital infrastructure delivery services to government departments have been centralized in Manitoba Consumer Protection and Government Services. These services include information technology, capital project planning and delivery, and asset management for government-owned buildings.

The department provides property services for owned capital assets, provides project management and real estate services to government, and oversees real estate and property asset disposal. Assets administered by the department include the Legislative Building, the Manitoba Museum and Centennial Concert Hall, correctional institutes, courts and government office spaces.

The 2023/24 capital plan is $51-million for capital projects to improve, repair and construct capital assets for government operations and programming. Significant continuing projects include the construction and renovation of Dauphin Courthouse, modernizing the courtrooms at Thompson Provincial Office Building and the renewal of the exterior stone cladding and roof at the Centennial Concert Hall in Winnipeg.

This year $84-million is committed towards information technology capital projects that support the annual upgrading and replacement of infrastructure.

This includes the Enterprise Resource Planning Modernization project that will upgrade critical business functions and support business transformation programs like Procurement Modernization and Finance and Administration Services Consolidation. It will streamline, digitize and standardize government operations to align with industry best practices and provide a platform to support the introduction of common business processes across the enterprise.

The Legislative Building Centennial Restoration and Preservation Act, through its statutory appropriation, continues to commit $10-million annually for upkeep and restoration. Projects of significance include the restoration of the 106-year-old service tunnel spanning Broadway and heritage exterior restoration on the east façade of the Legislature.

Manitoba Education and Early Childhood Learning

Over the last five years, $984-million has been invested in education capital spending, with an additional $1.297-billion planned over the next five years.

With 14 schools under construction or completed and another nine planned, the Manitoba government is on track to exceed the commitment to build 20 new schools by 2028. New schools going into design and construction in 2023/24 include K-8 schools in Sage Creek (Division scolaire franco-manitobaine and Louis Riel School Division), Seven Oaks School Division (Precinct F), Morden and Steinbach as well as a Grade 9 to 12 high school in Winnipeg.

To make this leap in building new schools, a historic $350-million in additional capital funding has been provided between 2020/21 and 2023/24.

Each new school includes the development of early learning and child-care spaces to increase availability of services for Manitoba families.

Investments have and continue to be made in existing school buildings to maintain a safe, healthy and accessible environment for students throughout the province.

Manitoba Natural Resources and Northern Development

Capital investments in natural resources and northern development are a key component in the delivery of many public-facing and conservation-focused programs including the management and operation of provincial parks and trails, natural resource stewardship, water stewardship and forest fire suppression activities across the province.

In 2022/23, the department developed a new multi-year Manitoba Parks Strategic Investment Capital Plan with a capital investment of an additional $10-million beginning in 2023/24. The increased funding will improve infrastructure, construct new facilities and provide the necessary equipment to support programs, tourism activities and services.

Highlights of the plan include expansions to yurt villages and other `glamping’ developments, campground infrastructure, electrification projects, significant trail improvement projects, and the redevelopment of the North Whiteshell Museum at Nutimik Lake.

Manitoba Families

Over the last five years, $205-million has been invested in housing with an additional $335-million planned over the next five years. Through the Manitoba Housing Renewal Corporation, the government supports the development of safe and affordable housing, particularly for those of low and moderate income or those with specialized needs. Significant investments have been made to repair and restore existing social housing units and address the repair backlog.

The 2023/24 capital plan continues with these necessary repairs by committing $67-million for building and asset renovations including exterior retrofits, mechanical, structural and security upgrades to its aging stock.

Plans for new buildings are being prioritized with the first new building to be planned and designed in 2023/24. New buildings will allow flexibility to move tenants out of existing buildings requiring significant retrofits and will later provide additional units to the housing portfolio.

Manitoba Health

Over the last five years, $754-million has been invested in capital health projects, with an additional $1.4-billion planned for the next five years. Capital investments in hospitals, clinics, personal care homes and emergency response services enable the provision of quality health care services to Manitobans.

Manitoba is making a historic capital investment in building, expanding and renovating health care facilities across the province in support of Manitoba’s Clinical and Preventive Services Plan. The plan, led by clinicians, improves access to care for all Manitobans and identifies planned investments in health infrastructure as being pivotal to efforts to support better care sooner and as close to home as possible.

In addition to the projects under the Clinical and Preventive Services Plan, Manitoba’s continued commitment to the expansion and redevelopment of rural and northern health care facilities is under way, including upgrading and replacement of building infrastructure and medical equipment such as diagnostic equipment, roof replacements, heating/cooling and electrical services, and upgrading and installation of fire protection systems in personal care homes.

The five-year capital plan includes project investments in new hospitals in Neepawa and Portage la Prairie, expansions at the Selkirk Regional Health Centre, Boundary Trails Health Centre and Bethesda Regional Health Centre, along with redevelopment and expansion projects at several sites including Virden, Souris, Killarney, Shoal Lake, Arborg, Beausejour and the emergency department at St. Boniface Hospital in Winnipeg.

Manitoba Municipal Relations

To support environmental, economic and social needs in communities and mitigate against adverse market conditions, Manitoba continues to support and facilitate innovative infrastructure funding solutions by working with provincial departments and external bodies, such as municipalities or the broader private sector, to make large, strategic and complex projects possible for Manitobans.

Drawing on best practices from other jurisdictions, Manitoba continues to develop strategic partnerships with the Canada Infrastructure Bank and others, exploring the merits of alternative delivery models or working with clients to leverage national, merit-based grants in support of both federal and provincial infrastructure initiatives.

Investments in infrastructure in Manitoba municipalities include Manitoba’s investments under the partnership with the Federal Government in the Investing in Canada Infrastructure Program (ICIP). More than $1.17-billion in federal funding will be available to support Manitoba’s infrastructure needs.

Manitoba has advanced 136 projects to Canada under the program, worth $3.2-billion in total project costs. Almost all provincial funding available under ICIP has been applied for, and 99 projects have been approved and jointly announced to date, with more federal approvals pending.

These projects will benefit Manitoba’s post-pandemic economic recovery by supporting job creation and economic growth while promoting sustainability, improving public spaces, modernizing water and waste-water treatment systems, mitigating impacts of climate-related events and enhancing public transit.

Working with the City of Winnipeg and Government of Canada to fund the Winnipeg North End Water Pollution Control Centre, with Manitoba investing $96.7-million towards phase one and further investment of $167.4-million for phase two.

The Manitoba Water Services Board has significantly expanded the amount of construction undertaken to replace, upgrade or expand municipal potable water and sewer infrastructure throughout Manitoba.

In 2022, the board tendered and awarded 40 construction projects with a total construction cost of approximately $130 million, which includes a new water treatment plant and groundwater supply for the Town of Beausejour, a wastewater treatment lagoon expansion in Rosenort in the Rural Municipality of Morris, water and sewer main renewals in the Town of Snow Lake and phase two of the Town of Neepawa’s wastewater treatment facility upgrades.

New construction projects planned in 2023 includes $12-million for the second phase of the City of Thompson’s water and sewer main renewals, $5 million for a water treatment plant expansion in the Rural Municipality of Brokenhead, and $3.6-million in lift station upgrades in the City of Flin Flon. In addition, the board continues to work with municipalities to conduct planning and engineering to deliver tender-ready water and sewer projects for future funding opportunities.

Manitoba Transportation and Infrastructure

Over the last five years, $2.8-billion has been invested in transportation infrastructure, with an additional $4-billion planned over the next five years.

The Manitoba government has a vision to expand Manitoba as a transportation hub, improving trade access to markets and supporting investment in trade-based industry. In support of this vision, Manitoba is establishing a senior level advisory council. Long-term strategic initiatives are in place to build the foundation for Manitoba’s economic growth, including the Winnipeg One Million Perimeter Freeway Initiative and the Trade and Commerce Strategy.

The five-year plan will see more than $2.5-billion invested, and annual minimum commitments of $500-million in highway capital with some of the highlights including:

• investing in an access-controlled Perimeter Highway freeway system with major enhancements such as the interchanges at St. Mary’s Road (PR 200) and McGillivray Boulevard (PTH 3) to ensure the movement of goods along key international trade corridors;
• investing in national trade corridors, initially focusing on the twinning of PTH 1 from Falcon Lake to the Ontario border;
• investing in key trade and commerce routes to efficiently move goods within and across borders, including the reconstruction on PTH 12, rehabilitation on PTH 5 and a structure replacement on PTH 5 at Assiniboine River (Spruce Woods);
• supporting improved connectivity construction, with work commencing on the twinning of PTH 6 north of Winnipeg and PTH 3 southwest of Winnipeg;
• developing additional planned resiliency projects including the structure rehabilitation at Rivers Dam, structure replacements at Deloraine, Falcon Lake and Wanipigow Dams and a structure replacement at PR 305 at Red River (Ste. Agathe).

Constructing the Manitoba outlet channels remains a priority, with Indigenous consultation and engagement continuing as the project progresses through the federal environmental process. The flooding experienced in spring 2022 resulted in $392-million in recovery work to be completed in the next three years; and highlighted the importance of investing in climate resiliency to mitigate losses incurred from frequent flooding and other weather-related events.

Crown Corporations - Manitoba Hydro

Manitoba Hydro will invest approximately $3.4-billion over the next five years to provide safe, reliable energy through additions, improvements and replacement of existing infrastructure. Of the $654-million committed to its capital program in 2023/24, $585-million will sustain and support growth of the current and future performance capability of Manitoba Hydro’s generation, transmission and distribution assets.

A significant project included in the five-year capital plan is the Pointe du Bois Renewable Energy Project, which will increase capacity and the annual amount of clean, low-cost, renewable energy generated at the Pointe du Bois Generating Station.

Crown Corporations - Manitoba Liquor and Lotteries

Manitoba Liquor and Lotteries 2023/24 capital program of $91-million primarily focuses on projects that are required for the necessary maintenance, safety and security of Manitoba Liquor and Lotteries’ facilities, equipment, infrastructure, systems, employees and customers. In addition, it supports maintaining the equipment and systems essential for conducting gaming activity in business partner locations, including First Nation casinos and VLT gaming centers.

Crown Corporations - Manitoba Public Insurance

Manitoba Public Insurance continues to invest in technology to modernize and transform the corporation’s services, placing customers at the forefront by enabling expanded online service options for Manitobans.

Appendix: Manitoba Capital Highlights

Major Capital Projects

Manitoba is investing $3-billion towards capital infrastructure renewal in 2023-24. There is $1-billion in planned spending for major projects, each with an estimated total project cost greater than $10-million. These projects will be in various stages of planning and delivery in the year 2023/24.

Modernizing Government and Summary Reporting

Budget 2023 invests further in ongoing work to modernize government through better performance management, transforming the public service, investing in digital government and other initiatives to improve public service delivery.

Balanced Scorecards

The Manitoba government continues to enhance and implement what is expected to be the best integrated management strategy and performance measurement framework in Canada. The framework objectives are to strengthen the alignment of department level work with government priorities, improve accountability and transparency, and to deliver better outcomes for Manitobans.

Performance measurements are helping departments focus on priority areas and on improving results that are important to Manitobans. The framework has been instrumental in supporting the whole-of-government approach by getting government departments to align their business plans with budget priorities.

Balanced scorecards improve alignment to government priorities through cascading objectives and performance measures. By measuring performance against targets, government demonstrates progress on advancing priorities and accountability for results.

Every department’s Supplements to the Estimates of Expenditure document, which are departmental business plans, are tabled, distributed and available online no later than six business days after tabling the provincial budget. These business plans align with the broader government strategic priorities identified in the balanced scorecards. These plans and the annual reports are available to the public and contribute to increased transparency.

Department business plans include customized balanced scorecards, key initiatives and summary budget information, outlining their operational plans and activities for the year.

Balanced Scorecards in Action - Manitoba Environment and Climate

Manitoba Environment and Climate’s mandate is to protect and improve water quality across the province. As part of this mandate, the department monitors water quality in rivers and lakes. Water quality data are used to assess changes over time and suitability for drinking water, fish and other aquatic life, recreation, irrigation, and other important water uses. Water quality results are communicated with the Canadian Council of Ministers of the Environment (CCME) Water Quality Index.

Through balanced scorecards, Manitoba’s target for the Water Quality Index is 80 or higher, which is considered good to excellent water quality. On average across Manitoba, the Water Quality Index in 2021 was 87 (good).

Balanced Scorecards in Action - Manitoba Education and Early Childhood Learning

Access to high-quality child care is essential for Manitoba families. High-quality child care allows parents and care givers to re-enter the workforce, upgrade their skills and training, support their families and play an active role in the vibrancy of our community and the health of Manitoba’s economy.

Manitoba Education and Early Childhood Learning’s department plan calls for ensuring access to high-quality, accessible and affordable early learning and child-care services. To achieve this, the department has committed $94-million to create more than 1,600 new child-care spaces across the province with a focus on rural and Northern communities that are on track to be operational in 2023/24.

In addition, a first-in-Canada industry recognized technical vocational curriculum cluster in early childhood education has been developed, which will help meet the pressing need for more early childhood educators. High schools will begin pilot implementation in the 2023/24 school year.

The department is also making child care more affordable for Manitobans by reducing regulated parent fees to $10 a day, and has expanded eligibility to the Child Care Subsidy Program for families most in need. This performance measure is tracked in balanced scorecards and the progress is updated.

Balanced Scorecards in Action - Manitoba Municipal Relations

Manitoba Municipal Relations is tracking the percentage of the Municipal Service Delivery Improvement Program’s budget that is committed to projects. The program launched in 2021/22 to help municipalities conduct value-for-money audits to help municipalities maximize effectiveness when using taxpayer dollars to provide needed services to citizens.

The 2021/22 report of 88 per cent means $1.1-million of the budgeted $1.25-million was committed to projects in the program’s first year.

In 2022, a total of 22 applications were received through the second project intake. Following internal evaluation by the department, nine projects were recommended for approval by the minister. In 2023, successful project applicants will work directly with pre-qualified third-party consultants to manage comprehensive service delivery reviews for each municipality or planning district. This will result in a value-for-money audit report, including actionable recommendations. Final 2022 reports will be available for use by other local governments in 2023/24.

Balanced Scorecards in Action - Manitoba Sports, Culture and Heritage

Providing online access to information and services is a priority for the Manitoba government. Manitoba Sport, Culture and Heritage continues to increase online digital content, and has highlighted this goal through the following performance measures:

• increase the number of accessible departmental documents posted to InfoMB;
• increase the percentage of historical Manitoba government documents available in the Legislative Library’s Digital Collection of Manitoba Government Publications;
• increase the number of Keystone records available to the public; and
• increasing the number of archival records accessible to the public by 12,000 through the Keystone database, makes it easier for the public to search and access historical Manitoba documents.

In 2022/23, the department is projecting to exceed the target of adding 12,000 records to the database.

Procurement Modernization

The Manitoba government continues to strategically modernize its procurement practices and increase its collaboration with broader public sector entities to maximize value for money and ensure transparent, fair and competitive tenders.

By consolidating the purchasing power of core government and the broader public sector in high-value procurement categories such as facility services, information technology infrastructure and engineering services, government has achieved more than $34.5-million in savings since 2019.

With 14 per cent of government spending currently under category management and $4.1-billion in total annual addressable spending for government and the broader public sector, Manitoba has the potential to deliver hundreds of millions of dollars in annual savings in the coming years.

The Manitoba government is also working diligently on a number of initiatives aimed at simplifying the bidding process, reducing procurement time cycles and ensuring policy continues to be aligned with best practices and trade agreements.

Social Innovation Office

The Social Innovation Office brings together government, community, and private sector to solve the most pressing and complex social and environmental issues, maximizing impact. Since launching in 2019, the office has assisted government with more than 40 projects aimed at improving outcomes for Manitoba.

The Social Innovation Office has been focused on fostering innovation and cross-sector collaboration in numerous areas of government priority. Highlights of this work includes work in health care, protecting the environment and building stronger communities.

Successes have led to deeper relationships with community organizations, foundations and private sector partners. In 2023/24, work will be done to monitor the outcomes of current programs, while also collaborating to tackle more shared priorities, such as affordable housing and health care.

Healing Health Care

Government launched two outcome-based projects aimed at reducing factors associated with chronic disease while improving health outcomes. The depth of partnership on these projects has led to more collaboration, including a program that offers free menstrual products to those in greatest need and the commitment to explore more collaborative opportunities.

Protecting the Environment

The Social Innovation Office is currently using an outcome-based approach to explore an innovative way to reduce greenhouse gas emissions by diverting organic waste from landfills. The office is also exploring the opportunity of developing a sustainability bond aimed at capitalizing on the province’s ability to raise funds at low interest rates and serve as an important tool to help finance critical social and environmental projects.

Building Stronger Communities

In the fall of 2022, government announced the commitment to build nine new child-care centres using this partnership approach. Together with Manitoba Education and Early Childhood Learning, the Social Innovation Office collaborated with community partners to design a new partnership approach to the development of child-care centres. Further work is underway with community partners to co-create solutions to address the child-care workforce gap.

Supporting Manitoba Hydro by Lowering Fees

Manitoba recently took steps to financially stabilize Manitoba Hydro, including a 50 per cent reduction to both the water power rental rates and the Hydro Guarantee Fee starting in 2022/23. These changes resulted in approximately $190-million in savings for the utility that will be applied to reduce Manitoba Hydro’s debt.

These ongoing reductions will support the utility’s efforts to keep electricity rates low for Manitobans and provide the ability to start lowering its debt burden. It is anticipated that applying the savings to debt will save ratepayers $4-billion in accumulated debt over the next 20 years.

Regulatory Accountability

Creating a prosperous future for all Manitobans requires departments and government agencies to focus on regulatory modernization to ensure desired policy outcomes are achieved with the least administrative burden on stakeholders and government. Many small, common-sense regulatory changes can significantly reduce the time and resources needed to comply with provincial rules and regulations.

These small but important changes exemplify Manitoba’s commitment to identify, streamline and reduce regulatory requirements that are not achieving their intended objectives.

As a result, 100,664 regulatory requirements placed on Manitobans by government were removed by December 2022, a reduction of 10.7 per cent from the April 2016 baseline measurement of 939,827 regulatory requirements.

The Manitoba government continues to lead efforts to advance regulatory accountability and reduce red tape on inter-provincial trade. In January 2023, Manitoba removed additional exceptions under the Canadian Free Trade Agreement (CFTA) on naming and business activity restrictions for corporations providing land-surveying services, office location requirements for inter-jurisdictional law firms and residency requirements for individuals applying for wild rice harvesting and export licences. With the implementation of these latest trade barrier reductions, Manitoba will have the lowest remaining Canadian Free Trade Agreement and labour mobility exceptions in Canada.

Through the Canadian Free Trade Agreement’s Regulatory Reconciliation and Cooperation Table Work Plan, Manitoba has endorsed two reconciliation items and participated in the negotiation of 14 interprovincial Table Work Plan reconciliation items in areas including:

• occupational health and safety standards;
• technical safety;
• construction codes; and
• corporate registries.

Manitoba has also participated in the completion of two work plan cooperation items on the testing of automated and connected vehicles, and on prompt payment legislation and associated regulations under builders’ lien. These small changes help reduce barriers that impede business, investment and labour mobility between provinces.

Executive Government Organization Act Changes

Every day, hundreds of public servants from multiple departments work together to ensure the provincial government can provide the services relied on by Manitobans.

Today’s complex problems require even more collaboration amongst departments, not less. To support these efforts, changes will be made to The Executive Government Organization Act to support department efforts to share services, such as information management and technology, communications and policy development to ensure a whole-of-government response is made to address today’s challenges.

Digital Government

The Manitoba government has ambitions to accelerate Manitoba into the digital age by transforming the way citizens and business request and access public services. The plan takes a citizen and business first approach and looks at the province’s strategic priorities to establish the following themes:

• better and more efficient government services;
• improved tools and processes for cutting red tape;
• improved support for citizens and business;
• improved turnaround times on decisions and approvals;
• services where and when citizens and businesses need it; and
• 24/7 online channels for service, status monitoring and submissions.

Manitoba continues assembling the groundwork for the digital government evolution with key initiatives to drive efficiencies in the 2023/24 fiscal year. Highlights include plans to:

• establish an enterprise-wide back-office systems to modernize resource planning systems and standardize processes and information exchanges to improve how the Manitoba public service works and expand digital service delivery capacity;
• modernize the courts technology systems and align them with Manitoba Justice’s modernization goals, including electronic filing of documents, reduced paper and improved integration between systems;
• evolve citizen engagement and services technologies to streamline and enhance the citizen experience and ensure easier and faster access to services and programs, including using strategic digital platforms and an improved delivery approach to drive better fiscal outcomes;
• enhance information technology cyber security services as more digital services come online;
• advance business engagement and services technology that will streamline and enhance business experience and provide better service and program delivery, including using strategic digital platforms and efficient delivery methods; and
• support enterprise records management and undertake foundational work to support a content services platform that will streamline document workflows to improve response times.

Building on this momentum, progress continues in areas such as data science, robotics process automation and modernizing the government’s core information technology systems in the 2023/24 fiscal year. This will include:

• enhancing data science by leveraging diverse data sources and advanced predictive analytics to drive evidence-based decision-making, future focused planning and service delivery.
• implementing robotics process automation with the continued rollout of software that automates manual and repetitive activities;
• using a cloud-first approach by transitioning information technology infrastructure and business applications to the cloud, which will allow government to offer more cloud- based services that increase operational efficiencies; and
• introducing technology that supports identification and personal credential recognition within an online channel, offering an alternative to in-person visits when identification of a person is required.

Transforming Manitoba’s Public Service Culture

To provide better outcomes for Manitobans, Manitoba’s Public Service continues its transformation journey as a modern and innovative organization. In February 2022, The Public Service Act came into force and sets out the foundational principles to support a modern public service, which include diversity, inclusion, ethics and integrity.

The Public Service Commission, in collaboration with government departments, continues to advance initiatives and programs that support these principles and ensure Manitoba’s Public Service is equipped to provide high quality services and programs to Manitobans, now and in the future.

The commission is focused on supporting the development and success of public servants through leadership programs and services, consistent onboarding for new employees and new leaders and new training opportunities to advance reconciliation and to foster diverse, inclusive and accessible services for Manitobans and workplaces for employees.

Supporting a Sustainable Workforce

The Manitoba government continues to support employee development and recruitment strategies to address current and future employment needs, ensuring a sustainable workforce is maintained to meet the needs of Manitobans. This includes filling priority vacant positions to support continued direct service delivery and public safety, supporting a data-driven workforce, succession planning and targeted outreach for difficult-to-recruit positions.

Following an organizational review conducted with the assistance of a third-party consultant, the Public Service Commission is undergoing a redesign of its service delivery model. The redesign is intended to increase efficiencies in the department’s human resource, employee development, policy, data management and labour relations functions, including realigning talent acquisition into a dedicated unit focused on recruitment and outreach activities.

Employee Engagement

The Manitoba government recognizes its employees are critical to the success of the organization. A highly-engaged public service helps deliver government’s priorities and improve outcomes for Manitobans. Collecting valuable feedback from employees is a critical way to assess the needed actions to enhance employee engagement, and ensure employees have the tools necessary to maximize their potential and meet the needs of Manitobans.

The Employee Perspectives Program includes annual engagement surveys on a range of topics, including leadership, employee development, capacity and workplace culture. Past employee feedback has helped inform the development and implementation of programs such as the Learning Fund and the Idea Fund, and the most recent survey conducted in January 2023.

Starting in January 2022, Probe Research Inc. was engaged to support survey delivery and the development of an online employee panel. The panel is made up of a representative and diverse group of public servants that provide feedback through additional topical surveys and engagements throughout the year. In 2022, the panel provided meaningful feedback that will help inform the development of a new employee giving program.

To help inform actions to support employee retention, the program was expanded in the fall of 2022 with the launch of a new corporate exit survey. With this new tool, employees who are voluntarily exiting the Manitoba government or moving to another department can share their perspectives on a range of topics related to the workplace, such as employee engagement and recognition.

Diversity and Inclusion Efforts

The Manitoba government is dedicated to the ongoing advancement of diversity, equity and inclusion within Manitoba’s Public Service. Important work is being undertaken to ensure government policies, programs, and initiatives are inclusive, accessible and equitable.

In 2022, a new diversity and inclusion policy was introduced that commits to achieving an inclusive public service at all levels within the organization. A new Manitoba Government Accessibility Plan for 2023 and 2024 was also developed, and includes actions to make government workplaces, products and services accessible to all Manitobans, including employees.

The Public Service Commission continues to collaborate with employee network groups and external organizations, such as Pride Winnipeg, Indigenous-led organizations and accessibility-serving organizations, to support diversity and inclusion-related learning events and courses for public servants. In spring 2022, the Manitoba government also became an official partner of Pride at Work Canada, an organization that empowers Canadian employers to build workplaces that celebrate all employees regardless of gender expression, gender identity, and sexual orientation.

The commission is also redesigning a mandatory course for all public servants with the most current information, resources and tools that support diverse, equitable and inclusive workplaces.

Employment equity strategies within recruitment processes also continue to be assessed to support focused efforts to increase diversity within Manitoba’s Public Service, which includes giving preference to or designating competitions for members of one or more designated groups (women, Indigenous peoples, visible minorities and persons with disabilities).

Truth and Reconciliation Initiatives

The Manitoba government remains committed to advancing reconciliation in Manitoba’s Public Service by supporting the Truth and Reconciliation Commission’s Call to Action #57 and implementing The Path to Reconciliation Act through educational workshops for public servants at all levels of government. Several training and engagement opportunities were provided to public servants in the past year, including:

• The Path to Reconciliation: A Historic and Contemporary Overview ;
• Building Your Indigenous Cross-Cultural Awareness ;
• Exploring the Historical and Modern Treaty Relationship ; and
• lunch-and-learn sessions with speakers from the Treaty Relations Commission of Manitoba.

In addition, workshops offered in the past year include Making Truth and Reconciliation Real, Residential School History and Experiences, and Historical and Modern Treaty Relationships.

In 2023, the Public Service Commission is launching a new mandatory course for all public servants designed to increase awareness about the historical and contemporary issues facing Indigenous peoples in Manitoba and Canada, which include Inuit, Métis and First Nations. The course will also build awareness of the contributions of Indigenous peoples, and ways that public servants can develop respectful and effective relationships with Indigenous peoples and communities.

The commission has also created new Indigenous consultant positions to focus on employee learning, recruitment of new Indigenous talent to Manitoba’s Public Service and other projects that advance Truth and Reconciliation across the public service.

Investing in Public Servants - Learning Fund

Since its inception in 2019, there has been considerable interest in the Learning Fund, which has become a vital initiative that supports the professional development of public servants. This $2-million centralized fund provides equitable access to all public servants to take education and training that supports job-specific and organizational needs.

Public servants’ drive for learning and development was evident in 2022. Between April and November 2022, more than 895 applications were received, of which 698 were individual and 197 were group applications. Over 95 per cent of these applications were approved at a total cost of $2-million, supporting the professional and personal development of more than 6,100 public servants.

Investing in Public Servants - Improving Employee Learning

The Public Service Commission continues to deliver workshops that support the current development needs of employees to ensure the public service is equipped to provide high quality services and programs to Manitobans, now and in the future.

Workshops for 2022/23 focused on innovation and continuous improvement that support transformation initiatives and efficiencies, as well as on interpersonal communication, mental health and wellness, stress reduction and diversity equity and inclusion training.

In 2023/24, course offerings will focus on technology, performance measurement, effective project management and further advancing accessibility through customer service and employment practices.

Investing in Public Servants - Developing Leaders

Transformational leadership training continues to be a priority for executive and senior leaders in partnership with York University’s Schulich Executive Education Centre. As of December 2022, 80 executives and 122 senior leaders have completed the programs. Further leadership development programming for executives, senior leaders and managers was launched in 2022/23, with additional programming planned for 2023/24.

The Leaders in Training Program, a paid internship program that helps develop future leaders, was enhanced in 2022 with the launch of a new data science internship to attract new data scientists and expertise across government. Since its inception in 2019, the program has recruited 39 interns in the general stream, 16 in the financial stream, and five in the data science stream to foster new and emerging talent in the public service.

Collective Bargaining

Summary government has approximately 200 separate bargaining units spanning departments and all government reporting entities, including school divisions, post-secondary institutions, health service delivery organizations and others.

In 2022/23, the vast majority of collective agreements were either settled or renewed by government, with the others in progress. Public servants are a valuable resource and the 2023/24 budget reflects all current contracts in both the departments and reporting entities.

Manitoba’s Economic Outlook and Review

Manitoba has one of the most diverse and balanced economies in Canada, which is made up of a variety of industries. The goods-producing sector generates 26 per cent of provincial gross domestic product (GDP) and private and public services account for a combined 74 per cent. Nearly ten industries contribute five per cent or more to the total provincial GDP. Historically, a decline in one area of the economy is offset by growth elsewhere, demonstrating the provincial economy’s resiliency to downturns.

Manitoba’s Economic Outlook

After a strong performance in 2022, the Manitoba economy faces several headwinds moving forward. Economies around the world are beginning to slow under the weight of decades-high inflation, tighter monetary policy, the ongoing Russian invasion of Ukraine, persistent supply chain disruptions and lingering labour shortages as markets adjust.

Budget 2023 expects the province’s real GDP to slow from 3.6 per cent growth in 2022 to 0.7 per cent in 2023, with an expansion of 1.1 per cent in 2024.

The Manitoba economy is not immune to these global economic forces. Private forecasters are projecting the provincial economy to decelerate in the following years, although at a slower pace relative to other provincial economies that are more sensitive to recent interest rate hikes. In fact, several forecasters are projecting some provincial economies to dip into a mild recession in 2023, but not Manitoba’s economy.

Due to strong labour market projections, the economic slowdown is not expected to translate into large-scale job losses and a spike in the unemployment rate, as is typical with a downturn. Rather, the decline in economic activity is expected to help balance labour markets by relieving pressure from existing labour shortages. Manitoba employment is expected to increase by 0.4 per cent in 2023 and 0.8 per cent in 2024.

Elevated inflation and growing incomes helped push up provincial nominal GDP growth in 2022 to levels not seen in decades, contributing to Manitoba’s strong fiscal performance in the 2022/23 fiscal year.

Restrictive monetary policy from the Bank of Canada is expected to stabilize price pressures and return inflation to target levels by 2024. Slower real economic growth, in combination with declining inflation, is projected to decelerate nominal GDP growth from 9.9 per cent in 2022 to 2.2 per cent in 2023 and 3.0 per cent in 2024. Moderate nominal GDP growth in the coming months will temper near-term tax revenue growth.

While the Manitoba economy is expected to avoid a contraction in 2023 and 2024, future monetary policy, inflation, persistent supply chain disruptions, geopolitical tensions, and environmental events create uncertainty to the provincial outlook.

Risks to Manitoba’s Economic Outlook

There remains considerable uncertainty in Manitoba’s economic forecast, especially in 2023. The following chart illustrates the uncertainty in the economic outlook due to risk factors outlined below.

The solid line, in the chart below represents the consensus forecast (i.e., average) and the dashed lines are the highs and lows, while the shaded area represents the range of uncertain in the forecasts. In 2023, the range of forecasts is 3.2 percentage points, compared to 0.9 points in 2024.

The following factors present risks to the outlook that could potentially cause the economy to depart from Budget 2023 expectations.

Monetary Policy

Since March 2022, the Bank of Canada has increased the policy interest rate by 425 basis points to 4.50 per cent - the highest rate since 2007. The Bank of Canada has signaled its intention to stabilize inflation to target levels (between one and three per cent).

Larger than anticipated employment growth and persistent high inflation rates in the first half of 2023 could provide the Bank of Canada with justification to raise interest rates further. Additionally, consumer sensitivity to higher interest rates will inform future Bank of Canada monetary policy decisions.

Inflation remains well-above the Bank of Canada’s target range. Inflation expectations that become entrenched could create challenges for businesses that are expanding and looking to create jobs. Moreover, persistent inflation in the absence of wage growth could erode household purchasing power and curtail spending. In its latest interest rate decision, the bank forecasts Consumer Price Index inflation to decline to three per cent in the middle of 2023 and decline further in 2024, reaching the two per cent target.

Supply Chain Disruptions

Global supply chain bottlenecks and shortages have been a main driver of upwards pressure on prices throughout the pandemic recovery. Although the past year saw improvements in terms of restoring global supply chains, challenges remain for several key industries. The end of China’s zero-COVID policy should relieve lingering supply-side pressures.

Geopolitical Tensions

The Russian invasion of Ukraine disrupted commodity markets and contributed to upwards pressure on prices in 2022, especially for energy and food. The Black Sea grain initiative signed in July 2022 helped to restore grain shipments from Ukraine. A sudden breakdown in the trade arrangement could exacerbate supply-side price pressures. Moreover, several Western countries introduced a price cap on Russian oil that could affect global energy prices.

Environmental Events

Climate change and extreme weather events such as droughts, flooding, and wildfires pose threats to the provincial economy and finances as these events can have a material impact on people, communities, jobs, and economic activity. For example, the severe drought experienced in 2021 resulted in below-average yields for all major crops and contributed to a substantial increase in insurance claims payable (up 213 per cent) and indemnities (up 716 per cent).

Canadian Outlook

Heading into 2023, the Canadian economy faces many of the same challenges as Manitoba.

• High inflation and interest rates are contributing to rising costs to households and businesses, underscoring affordability concerns across the country.
• The Canadian housing market continues to slide, especially in jurisdictions that experienced a surge in activity and prices during the pandemic.
• Labour markets remain tight, although ambitious immigration targets could help to alleviate labour shortages in time.

In addition, Canadian exports in 2023 are expected to be adversely affected by the projected economic slowdown in the United States (U.S.) and ongoing global supply chain issues, particularly in the manufacturing sector. `Buy American’ procurement policies noted in the most-recent U.S. State of the Union address could also create challenges for Canadian exports.

On the other hand, agricultural products, such as wheat and fertilizer, will have an advantage from strong global demand. In addition, oil and gas producing provinces will continue to benefit from elevated energy prices.

Like Manitoba, national household savings is falling from the elevated rates recorded during the pandemic to normal levels. Household spending is expected to slow as families cope with rising costs of living.

Budget 2023 expects the Canadian economy to expand by 0.5 per cent in 2023 and 1.3 per cent in 2024.

International Outlook

The outlook for the American economy has dimmed in light of the present global economic challenges. Consumer inflation is slowing in the U.S. but remains well-above target levels at 6.5 per cent growth on an annual basis in December 2022.

Elevated inflation, combined with strong employment growth and ongoing labour shortages, may provide the U.S. Federal Reserve with more justification to raise interest rates further.

The American key interest rate is currently set at 4.50 to 4.75 per cent. Further rate hikes by the U.S. Federal Reserve will likely strengthen the American dollar relative to the Canadian dollar, which could help to stimulate demand for Manitoba exports. However, a slowing American economy is likely to offset gains made from a weaker Canadian dollar. The American economy is projected to expand by a modest 1.4 per cent in 2023 and 1.0 per cent in 2024.

China’s announcement to end the country’s zero-COVID policy should provide a boost in demand for Manitoba commodities such as copper, canola and transportation equipment, as well as restore fractured global supply chains. On the downside, renewed demand in China could accelerate present inflationary pressures. The table below shows the projected economic growth rates for Manitoba’s key international trading partners.

Manitoba Economic Review

The Manitoba economy showed healthy growth in 2022 as the province emerged from multiple pandemic waves and a severe drought in the previous year. Overall, the Manitoba economy expanded by an estimated 3.6 per cent in 2022, ranking third highest in Canada and best among non-resource-based provinces.

Notably, the Manitoba economy achieved several all-time highs, including:

• manufacturing shipments totalling nearly $25-billion, roughly $600-million above pre-pandemic levels;
• farm cash receipts increasing by $1.4-billion to $9.8-billion, 48 per cent above pre-pandemic levels;
• foreign merchandise exports surpassing $20-billion, nearly $5-billion above pre-pandemic levels;
• investment in residential construction eclipsing $5-billion;
• the labour force population reaching a record 709,800;
• employee compensation exceeding $40-billion for the first-time ever; and
• the second lowest unemployment rate in Canada at 4.6 per cent.

See the appendix on page 100 for a comprehensive listing of Manitoba economic statistics.

Inflation

Consumer inflation, as measured by Statistics Canada’s Consumer Price Index (CPI), reached a near 40-year high in June 2022 in Manitoba, peaking at 9.4 per cent growth year-over-year. Since then, inflationary pressures have eased slightly, falling to 8.0 per cent growth in December. Annual consumer inflation in 2022 was 7.8 per cent in Manitoba and 6.8 per cent in Canada.

Some indicators in the inflation data are pointing in the right direction. Energy prices have declined from their peak of 40.7 per cent year-over-year growth in June 2022 to 15.2 per cent growth in December. However, elevated inflation has spread beyond energy into other commodities, particularly food and services, which are seeing accelerated price growth in recent months.

Consumer Price Inflation

Budget 2023 expects consumer inflation to fall to 3.8 per cent in 2023 and 2.2 per cent in 2024. However, as noted in the outlook risks section above, inflation expectations that become entrenched could see high inflation persist for longer.

Labour Market

The Manitoba labour market experienced a robust recovery in 2022 underpinned by strong economic growth and record immigration. After losing 90,500 jobs during the pandemic low in April 2020, Manitoba has regained more than 100,000 jobs.

Moreover, the Manitoba labour force was the fastest to return to pre-pandemic levels further underscoring the economy’s resiliency. In 2022, Manitoba employment expanded by 2.7 per cent, representing the second largest growth in recorded history - trailing only last year. Additionally, the provincial labour force reached a new record high of nearly 710,000 persons. A growing labour force is integral to meeting the demands of future business investment and an expanding economy.

The strength in job growth contributed to one of the lowest unemployment rates in Canada at 4.6 per cent. Manitoba’s strong labour market also plays a role in insulating the provincial economy from the recession projected in other provincial economies in 2023.

With a surging economy and robust demand for labour, businesses in several key industries have reported labour shortages. Indeed, the number of job vacancies in Manitoba reached a record high in the third quarter of 2022 at 32,290, representing a 102 per cent increase above the same quarter in 2019.

Jurisdictions from across Canada and the United States are experiencing similar challenges. In Canada, the number of job vacancies surpassed one million in the second quarter of 2022.

Higher wages help households to retain purchasing power and sustain against the rising costs of goods and services. However, persistent upwards pressure on wages is a challenge for businesses expanding and looking to create jobs.

A tight labour market and rising costs of living is giving workers more leverage in negotiating higher wages. Unsurprisingly, wages in Manitoba are showing signs of acceleration. Consumer inflation increased on average by 0.6 per cent in 2022, whereas wages only grew by 0.4 per cent.

Over the past five months, however, monthly wage growth outpaced inflation, increasing on average by 0.5 per cent. Budget 2023 expects employment growth to slow from 2.7 per cent in 2022 to a modest 0.4 per cent in 2023 and 0.8 per cent in 2024.

Rolling Annual Farm Cash Receipts Manitoba

Agriculture

The 2022 crop production season got off to a slow start, mainly due to exceedingly wet conditions in the spring. Despite the late start, the growing season turned out to be favourable with adequate moisture and suitable above-average temperatures. This allowed crops to flourish and mature before any frost damage. While the two largest crops, canola and wheat, achieved yields slightly below recent averages, the soybean, oat and corn yields set new records.

Despite the delays and unseeded acres, 2022 production was overall above average and a welcome recovery following the 2021 drought. In fact, Manitoba’s farm cash receipts increased by $1.4-billion to $9.8-billion, 48 per cent above pre-pandemic levels.

With low inventories after 2021 and a delayed 2022 harvest, the volume of crops available to market was notably lower during 2022. Fortunately, prices remained at elevated levels and farm cash receipts from crops registered slightly higher than 2021 levels and set new records. However, higher prices for key inputs, including fertilizer and fuel, largely curtailed gains in profit margins.

Looking ahead for 2023, global demand for crops continues to show steady strength and prices are expected to remain at around current levels until the size of the 2023 harvest becomes more confidently known. With the large 2022 harvest, supplies available for sale will allow steady marketing until the 2023 harvest.

Livestock receipts enjoyed strong growth in 2022, driven by the hog sector. Similar to crops, this was driven by higher production and higher output prices, while higher input costs - notably feed - offset some of the revenue gains. Heading into 2023, the hog, dairy and poultry sectors are expected to see slower but steady growth, while the cattle sector continues to recover after the 2021 drought contracted herd numbers.

Population

Manitoba has the fifth largest population in Canada at 1,420,228 persons (Oct. 1, 2022), representing roughly 3.6 per cent of the national population.

Manitoba’s population is relatively young, with a median age of 37.7 years on Jul. 1, 2022 - the lowest median age among provinces, and below Canada’s median age of 40 years. Manitoba’s younger population will create an ongoing supply of labour for the province in the coming years helping to minimize emerging shortages.

Since the inception of Manitoba’s Provincial Nominee Program (MPNP) in 1998, immigration has contributed an increasing number of new residents to the province. However, on Mar. 18, 2020, the Government of Canada implemented travel restrictions aimed at reducing the spread of COVID-19. In addition, the implementation of COVID-19 related health and safety measures within Government of Canada offices affected processing times for immigration applications and temporary resident permits.

As a result of these measures, both population growth and immigration levels slowed during the height of the pandemic. Between Oct. 1, 2019 and Oct. 1, 2020, Manitoba’s population increased by 7,727 persons - well below the pre-pandemic ten-year average of 16,197 persons per year. During the 2019/20 period, Manitoba gained 10,888 immigrants - a 29.2 per cent decrease compared to the average for the 2009/10 to 2018/19 period.

With COVID-19 travel restrictions no longer in effect and a commitment to assist Ukrainians fleeing the Russian invasion, Manitoba is seeing strong increases in both permanent and temporary international migration inflows. In 2021/22, Manitoba’s immigration level nearly doubled, up 82.5 per cent compared to the previous twelve months and highest since at least 1946/47. Furthermore, the change in non-permanent residents reached 9,553 persons - a level not seen since at least 1971/72, and nearly three times the 3,311 persons recorded in 2020/21.

Results from the 2022 Manitoba Provincial Nominee Program (MPNP) exceeded expectations in attracting record numbers of skilled immigrants. Number of individuals arriving through MPNP reached 14,000 in 2022, the highest number since the program was established in 1998. Since inception, the MPNP had attracted more than 184,000 nominees and their families to Manitoba from all over the world.

The Manitoba government is currently working with the federal government to renew the existing immigration agreements to help achieve national immigration targets and meet the needs of the province beyond the pandemic.

12-month Population Growth Components Manitoba

Appendix - Economic Indicators

Fiscal Strategy

The Fiscal Responsibility and Taxpayer Protection Act requires the Minister of Finance to present a report on the government’s fiscal responsibility strategy on budget day.

Manitoba’s fiscal strategy takes into consideration the province’s financial health given the context of the overall socio-economic environment and financial conditions.

The fiscal strategy is the government’s plan for managing revenues, expenditures and capital infrastructure in a way that is consistent not only with short-term investment requirements but also long-term objectives of building fiscal resilience while meeting the needs of Manitobans today and in the future.

The fiscal strategy includes the following key objectives:

• considering the needs and well-being of present and future generations and the environment;
• ensuring all summary government resources are managed effectively and efficiently;
• maintaining an efficient, fair and stable revenue strategy;
• taking prudent and responsible steps to return to budgetary balance; and
• making best efforts to gradually reduce the provincial debt once fiscal balance has been achieved.

As outlined in the section below, Budget 2023 reports on several indicators to help guide and evaluate progress on the fiscal strategy. The indicators also tie the plans in the budget to the reporting on the government’s fiscal health in the annual public accounts.

Fiscal Outlook

Manitoba’s fiscal outlook is informed by the economic outlook and review. The interim forecast for the 2022/23 fiscal year, which will be finalized in the Public Accounts for the fiscal year, is a deficit of $378-million. The Budget 2023 plan is a deficit of $363-million for fiscal year 2023/24.

The medium-term plan shows declining deficits over the fiscal outlook from $294-million in 2024/25 to $53-million in 2026/27. Reflecting the multi-year capital infrastructure investment plan and moderating economic growth, the outlook for Manitoba’s net-debt to GDP shows the ratio growing in 2023/24 and 2024/25 followed by a declining trend over the planning horizon.

Challenging Forecasting Environment

Manitoba Finance surveys nine private-sector economic forecasters on its economic outlook. The average of the forecasts is used for fiscal planning purposes. Changes in the economic forecast affect the estimates for provincial revenues and expenses. The graph illustrates the uncertainty inherent in the forecast over the coming years.

Fiscal Indicators

Budget 2023 highlights several fiscal indicators to guide the fiscal strategy. These indicators help the assessment of a government’s financial condition and also align with those published in the annual provincial Public Accounts, as recommended by the Public Sector Accounting Board. The indicators also compare budgetary expenditures with the growth in Manitoba’s economy.

The indicators, expressed as ratios or trends, serve as anchors to measure the extent to which budget plans are being accomplished. These metrics help guide ongoing work to address the deficit and the debt, and to build a path that progressively balances competing internal and external needs and pressures. The fiscal indicators are grouped into the following categories.

Sustainability Indicators

These measures trace the ability of a government to maintain its services and programs over a longer term. The following indicators have been selected to assess sustainability:

• expenditure as a share of provincial GDP;
• annual net income or loss to provincial GDP; and
• net debt as a share of provincial GDP.

Flexibility Indicator

This measures how well a government can respond to changing financial commitments with revenue measures and debt management strategy. The indicator is:

• public debt charges to total revenue.

Vulnerability Indicator

This measures how much a government relies on revenue sources beyond its direct control or influence, both domestically and internationally. The indicator is:

• federal transfers to total revenue.

Sustainability Indicator Performance:

Expenditure as a share of provincial GDP

Expenditures as a percentage of the provincial economy, measured by nominal Gross Domestic Product (GDP), indicates the amount of annual government spending on programs and other costs as a share of the total GDP.

As shown in the graph, Manitoba’s total expenditures as a share of the economy before the pandemic was moving towards the weighted average for Canadian provinces.

Given inflationary pressure, which affects government spending, Budget 2023 proposes to spend almost $21.9-billion. Compared to a projected GDP of over $89.7-billion, the ratio of total expenditures to provincial GDP is estimated at 24.4 per cent for 2023/24.

Annual net income or loss to Provincial GDP

This indicator represents the government’s summary bottom line and re-establishes a strategic approach to responsibly balance Manitoba’s budget over a number of years. The ratio of net income (loss)-to-provincial GDP measures the difference between revenues and expenses expressed as a percentage of GDP.

Budget 2023 was prepared during a period of great economic turmoil and uncertainty, and balances immediate needs against long-term goals. With lasting effects from the COVID-19 pandemic still affecting the health care system and the economy across the world, global supply chain constraints, the ongoing Russian invasion of Ukraine and labour shortages, inflation rates have escalated to their highest levels in decades.

Given that the budget is prepared during a period of great economic and financial market uncertainties, the strategy is to balance immediate needs against long-term economic and financial goals. Budget 2023 will maintain the annual net loss to provincial GDP at (0.4) per cent in 2023/24.

Net debt as a share of provincial GDP

Provincial net debt represents accumulated financial obligations for governments over time. It indicates the level of future revenue required to pay down these obligations from past transactions or unanticipated events.

Responsibly balancing Manitoba’s longer-term investment needs in tangible and non-financial capital assets, combined with a strategy to gradually return to balance is reflected in a stabilized ratio of net debt as a share of provincial GDP.

Incorporating the jump in pandemic related borrowing, net debt as a percentage of provincial GDP increased to 37.6 per cent in 2020/21, up from 34.1 per cent in 2019/20.

With GDP growth expected to slow in 2023/24, combined with a renewed capital infrastructure plan, the ratio is expected to grow to 34.6 per cent in 2023/24.

Flexibility Indicator Performance:

Public Debt Charges to Total Revenue

The amount of debt charges or interest costs as a percentage of total revenue is a measure of flexibility. It shows the extent to which a government must use revenue to pay interest and other debt servicing costs rather than provide services or programs.

The Bank of Canada has aggressively raised Canadian interest rates starting in March 2022. To date, the Canadian trend setting rate has increased by 425 basis points. The possibility of further interest rate hikes is there, if decade-high inflation rates persist into 2023 and 2024. Rising interest rates are pressuring fiscal flexibility. Debt servicing costs to provincial revenues rose in 2022/23 to 5.4 cents for every revenue dollar from 5.1 cents in 2021/22. The interest rate pressure is expected to lift debt servicing cost to 6.0 cents for every revenue dollar in 2023/24.

Vulnerability Indicator Performance:

Federal Transfers to Total Revenue

The ratio of federal transfers to total revenue measures the vulnerability of provinces to changes in transfers from the Government of Canada.

Vulnerability is the extent to which a government depends on sources of revenue outside of its control or influence.

The overall trend shows federal transfers to provincial revenues slowly increasing before the pandemic. The share rose sharply during the height of the pandemic due to one-time targeted support and introduction of new cost shared programs.

As illustrated in the chart, the share is expected to increase to 33.9 per cent in 2023/24. This reflects a notable increase in equalization and additional cost shared programs. The increase in equalization payments in 2023/24 is due to a number of factors, including relatively strong fiscal capacity growth in some of the other provinces receiving equalization, population growth in Manitoba as well as a historically large increase in the overall program.

Credit Ratings

Credit rating agencies monitor the government’s progress on the fiscal strategy and assess the credit worthiness of the province and the ability to pay back debt obligations. Investors partially make decisions to buy Manitoba bonds based on the credit ratings assigned by rating agencies.

Manitoba bonds are rated A+ with stable outlook by Standard and Poor’s, Aa2 stable by Moody’s and A(high) stable by DBRS. Manitoba bonds require a formal rating in order for some investors to consider purchasing.

When evaluating a credit, rating agencies look at such factors as the economy, financial performance, liquidity levels and debt burden.

Borrowing and Debt Management Strategy

Manitoba raises funds in both Canadian and international capital markets. This provides the Manitoba government with a cost-effective source of financing.

The Manitoba government engages in domestic and international capital markets to manage government obligations and cash flow liquidity requirements. The government also borrows on behalf of Manitoba Hydro, with principal and interest payments fully recoverable from the corporation.

As a result of the province borrowing on behalf of Manitoba Hydro, a guarantee fee is paid by the corporation. In fiscal 2022/23, the Manitoba government reduced Manitoba Hydro’s guarantee fee by 50 per cent, allowing the corporation to improve its financial metrics and pay down a portion of current debt outstanding.

Borrowing Authority

The borrowing authority is set out in The Financial Administration Act, allowing the Minister of Finance to raise funds on behalf of the province. The act sets limits for debt outstanding in a given year for both the Manitoba government and Manitoba Hydro.

These limits are reviewed annually and may be adjusted based on expected new cash requirements plus a contingency. The act also allows for an increase because of extraordinary circumstances, such as flooding, other natural disasters and pandemics.

Currently, the limit sits at $44.4-billion for the province and $29.3-billion for Manitoba Hydro. As a part of these reforms, this budget and subsequent budgets will report on the status and projections of the provincial debt and how this compares to borrowing authority limits.

Debt Management Strategy

To ensure market availability to complete its borrowing program, Manitoba raises funds in both domestic and international capital markets. A well-established domestic program is the primary source of funding for the province, for both short- and long-term borrowing.

Short-Term Borrowing Program

Manitoba’s short-term borrowing program provides a cost-effective option for financing, and also provides liquidity for the province. The program primarily raises funds through a weekly 91-day Treasury-Bill Auction. To augment the Treasury-Bill program, there is authority in place to issue promissory notes for immediate cash requirements if necessary.

Long-Term Borrowing Program

Most of Manitoba’s funding is raised in long-term markets with the focus on benchmark size issues in 10 and 30-year terms. This ensures a robust secondary trading market in Manitoba bonds that is critical to investors. During fiscal year 2022/23, Manitoba also accessed the domestic market with a five-year bond.

In addition to and in line with government priorities, Manitoba will engage a Sustainability Bond Structuring Agent to help the province evaluate the prospects of developing a Sustainable Bond Framework.

International Markets

To ensure access to international markets, Manitoba has established formal programs that are filed with regulators in the United States, Europe and Australia.

Having the ability to issue in international markets increases access to capital while also diversifying the province’s investor base.

Manitoba will only borrow in international markets if the costs are competitive with the domestic market, which borrowing have consistently generated savings. The Manitoba government has no foreign currency risk as all international issuance is swapped back to Canadian dollars.

Risk Management

A key component of Manitoba Finance’s debt management strategy is the use of derivative instruments for managing financial risks that are used to mitigate:

• asset liability risks - alter pattern or characteristics of debt service payments to facilitate a balanced asset and liability match of the Loans and Advances program;
• foreign currency risks - eliminate foreign exchange exposure while taking advantage of pricing arbitrage by facilitating offshore funding;
• interest rate risks - provide financial stability by reducing the impact of interest rate volatility; and
• refinancing risks - provide long-term interest rate protection required to match long-term funding obligations.

Treasury Management System

Given the amount of financial risk inherent within government borrowing and debt management programs, Manitoba Finance is actively pursuing a more sophisticated system to manage this risk.

It will meet modern standards, best practices, and satisfy specific and critical business and risk requirements. From the new system, the Treasury Division will develop enhanced value-added reporting, as well as more robust risk management and forecasting models.

Investor Relations

As Manitoba is competing with other entities for a finite amount of investor capital, it is imperative the purchasers of Manitoba’s bonds are continually updated on the financial and strategic objectives of the government.

The province participates in government finance conferences as well as has regular meetings with investors to ensure they have the credit analysis of the province completed before going to market.

Investors also use reports from the credit rating agencies to facilitate their evaluation of the province. Manitoba Finance officials are regularly engaged with these agencies to ensure they are fully apprised on the economic, financial and fiscal environment in Manitoba.

Liquidity

The amount of liquidity Manitoba retains is dependent on the level of uncertainty in capital markets at any given time, due to unexpected events such as a pandemic or geo-political occurrences.

Market uncertainty has continued through fiscal 2022/23, creating the need for a significant amount of cash reserves. As a result, the government continues to maintain a high liquidity position.

Historically, Manitoba maintained approximately three months of cash requirements on hand, but has now increased this position to six months of requirements. These reserves are made up of cash, which are invested in short-term instruments plus investments in the Fiscal Stabilization Account and the Provincial Sinking Fund. Manitoba invests only in high-quality liquid instruments such as Government of Canada, provincial government, and municipal bonds.

2022/23 Borrowing Update

As of February 17, 2023, the Manitoba government has raised $3.9-billion in fiscal 2022/23. This includes six months of pre-funding for 2023/24.

Manitoba raised more than 90 per cent of its fiscal 2022/23 borrowing in Canadian domestic markets. The Manitoba government also issued in international markets, including $263-million Canadian equivalent in European private placements.

Manitoba’s current gross outstanding debt as of February 17, 2023 is $57.7-billion.

2023/24 Borrowing Requirements

Borrowing requirements in 2023/24 are forecast to be $4.7-billion. This amount includes $2.1-billion of pre-funding for the next fiscal year. Domestic as well as international capital markets will be accessed to complete this program.

Borrowing Requirements - Mid-Term Outlook

In line with the government’s fiscal outlook, new borrowing requirements for the government will continue to decrease as the fiscal position improves in line with The Fiscal Responsibility and Taxpayers Protection Act.

For the past number of years Manitoba Hydro’s capital needs were a significant portion of the Manitoba government’s new borrowing requirements. With Bipole III completed and construction of Keeyask in its final stages, Manitoba Hydro’s medium-term forecast shows no new cash requirements as the corporation plans to fund capital requirements from internally generated funds.

As a result, the medium-term borrowing forecast shows new cash requirements to average $1.7-billion per year, while refinancing of maturing debt will average about $3.5-billion per year. The following table outlines expected future borrowings.

Debt Servicing Costs

Summary public debt costs for 2022/23 are forecast to be $1.1-billion, $88-million higher than Budget 2022, due to higher-than-forecasted interest rates and partially offset by decrease in borrowing requirements from budget.

For fiscal year 2023/24, summary public debt expense is forecast to be $1.3-billion.

The Bank of Canada increased its policy rate to levels last seen in 2017 and messaged it expects to hold the policy rate at these levels as it assesses the impact of the rate increases on the economy.

Manitoba’s forecast average interest rate for term borrowings during 2023/24 is 4.3 per cent. A one-percentage point increase in interest rates for an entire year will result in an estimated increase in debt servicing costs of $32.9-million.

Federal-Provincial Fiscal Arrangements

Canada’s constitution assigns responsibility for the delivery of key public services, such as health care, education, and social services, to the provinces and territories. Provinces and territories are also the primary funder of these services.

However, the federal government plays an important role in supporting these efforts by providing funding that helps to supplement provincial and territorial own source revenues. These funds are provided primarily through the major federal transfer programs - the Canada Health Transfer (CHT), Canada Social Transfer (CST), Equalization, and Territorial Formula Financing (TFF). All provinces and territories receive the CHT and CST each year, and all provinces have received support from the Equalization program at one time or another.

Funding provided through the major federal transfers remains the most effective and efficient way the federal government can support provinces in meeting their constitutional spending responsibilities in a fiscally responsible manner.

Provinces and territories are best positioned to allocate federal funds in a manner that addresses the specific and unique needs and challenges in their jurisdictions. Provinces and territories are also directly accountable to their citizens through well-established processes, including annual budgets and departmental annual reports, as well as oversight provided through Question Period and other legislative processes. For these reasons, major federal transfer payments are provided to provinces and territories under (mostly) unconditional terms. This is a critical feature of the major transfer programs, as well as the fiscal relationship between the federal and provincial/territorial governments.

Major federal transfers typically account for about one- quarter of Manitoba’s total summary revenue. Over the past five years, major transfer revenues have grown by $1.6-billion or 38.1 per cent. Manitoba will receive $5.9-billion through the major transfers in 2023/24, up $733-million or 14.2 per cent over 2022/23.

Equalization accounts for 60 per cent of Manitoba’s major federal transfers in 2023/24.

Manitoba’s Share of Health and Social Transfers is Declining

The federal government allocates the major health and social transfers, the CHT and CST, to the provinces and territories on an equal per capita basis. Manitoba’s declining share of the national population of late has resulted in an estimated $81-million less in funding for health and social transfers compared to what would have been the case if the province’s population had grown as fast as the national average.

Canada Health Transfer

The CHT is the major federal transfer in support of health care. It is also the largest of the major federal transfers. It provides provinces and territories with predictable and unconditional funding allocated on an equal per-capita basis.

Historically, the federal government has played an important role in helping support provincial and territorial health care services. However, starting in fiscal year 2017/18, the federal government cut growth in the CHT from a fixed six per cent per year to a three-year moving average of national nominal gross domestic product (GDP) growth, with funding guaranteed to increase by three per cent per year.

The decrease in the CHT’s growth rate since 2017/18 has reduced the overall federal contribution through the CHT in supporting total health care costs in Canada, resulting in billions of dollars less in health care funding for provinces and territories. For Manitoba, it means a reduction of hundreds of millions of dollars compared to what would have been received during this period under the previous formula.

Having access to quality and timely health care services is a top priority for all Canadians. It is also the single largest expenditure item of provincial and territorial governments including Manitoba. Manitoba will spend $7.9-billion on health care services in 2023/24, 36.2 per cent of the province’s total expenditures.

Manitoba will receive a total of $1.78-billion in base CHT funding in 2023/24, up $142-million or 8.7 per cent from 2022/23. The CHT will represent 22.5 per cent of Manitoba’s health expenditures in 2023/24. This does not include an additional $72 million that Manitoba will receive as its share of a $2 billion "top-up" payment provided to all provinces and territories "through" the CHT. The top-up is a one-time payment that will not be added to the CHT base, so it will not grow with the CHT or result in any additional health funding in future years.

Canada Social Transfer

The CST supports post-secondary education, social assistance and social services, as well as early childhood development and early learning and child care. The CST has a fixed, three per cent annual growth rate and is distributed to provinces and territories on an equal per- capita basis. The sole condition for the CST is that there be no minimum residency requirements for people seeking to receive social assistance.

Manitoba will receive $591-million through the CST in 2023/24, up $14-million or 2.4 per cent from 2022/23. Manitoba’s share of the CST nationally is 3.6 per cent.

Equalization

Equalization is funded by general taxes paid by all federal taxpayers. The federal government collects revenue from all Canadians and businesses and redistributes a certain amount to help provinces and territories fund services. The purpose of the Equalization program was entrenched in the Canadian Constitution in 1982.

Provinces with per-capita fiscal capacities below the national average receive payments to raise their fiscal capacities to the national average. Provinces above the national average do not receive payments.

Annual growth in the Equalization program is determined by a three-year moving average of growth in Canada’s nominal GDP, while fiscal capacity calculations are based on a three-year, weighted moving average of revenues, with a two-year data lag.

The federal equalization program has not experienced any major changes since 2009/10. The program is renewed every five years in line with the federal legislation governing the program. Any changes made as part of the 2024 renewal will be implemented in 2024/25.

Manitoba will receive $3.5-billion in equalization funding in 2023/24, up $577-million or 19.7 per cent from 2022/23. Manitoba’s large equalization increase in 2023/24 is due to a number of factors, including relatively strong fiscal capacity growth in some of the other provinces, growth in the province&aposs population, as well as a historically large increase in the overall program, which resulted in an adjustment payment to the province of $221-million.

Despite strong growth, Manitoba’s share of total Equalization payments increased by only 1.2 percentage points, from 13.4 per cent in 2022/23 to 14.6 per cent in 2023/24. Manitoba continues to receive the second lowest Equalization per capita after Quebec, not including Ontario, which qualified for an adjustment payment in 2023/24, but otherwise did not qualify for Equalization.

Manitoba’s per capita fiscal capacity, even after Equalization, is still well below that of the non-receiving provinces. For example, Alberta’s 2023/24 fiscal capacity, as measured by the Equalization program, is $14,004 per capita, compared to $10,706 for Manitoba (including Equalization), a deficit of $3,298 per Manitoban. This represents a $4.6-billion shortfall in Manitoba’s overall fiscal capacity compared to Alberta.