Greg Selinger's $93 million goof

Last spring, Greg Selinger, then Manitoba's Finance Minister, presented his budget on March 25, 2009. In his budget he estimated that Corporation Income Tax revenues for the 2009-2010 fiscal year would be $347 million.

I looked at the budget, and based on what happened in Manitoba during the 1991 recession, when corporate income tax revenues dropped dramatically, I suspected Selinger had made a big mistake in overestimating the corporate income tax revenue. The next day (March 26) in the Legislature I challenged Mr. Selinger on his calculations:

"Mr. Gerrard: Mr. Speaker, during the recession of the early 1990s, corporate income tax revenue dropped from $201 million in 1989 to $152 million in 1990 to $78 million in 1991, yet this government believes we will not experience such a significant drop-off in corporate tax revenue. Based on the experience of the early '90s, it's likely the minister is overestimating corporate tax revenues for the coming year by about $50 million to $100 million. "

In reply, Mr. Selinger said he was just using long standing projections.

In my supplementary question I asked:

"Mr. Gerrard: Mr. Speaker, you know, the minister says he's using long-standing predictions, but in 1991, the then Conservative government, presumably [using] the same predictions, made a serious error when it estimated corporate income tax revenues in the 1991 budget of $173 million, and they came in at $78 million. That was one of the most shocking mistakes in the history of Manitoba, overestimating by almost $100 million the [corporation tax] revenue. "

"Today, the present Minister of Finance is about to repeat a Tory mistake. The integrity of the budget is in jeopardy. He hasn't paid attention to the normal changes expected during an economic recession. Why is the Minister so determined to repeat the Tory mistakes of the past?"

Then on April 6, 2009, I asked again. Mr. Selinger was adamant "we expect the budget to stay on track."

And now, just before Christmas, the NDP government presented its updated budget forecast for the 2009-2010 fiscal year. And, there in black and white, is the revised estimate of corporate income tax revenue - now at $254 million, some $93 million less than the budget estimate of $347 million. This decrease in corporate income tax revenues, which was very predictable, is one of the significant reasons that the NDP now estimate they are way off track on this year's budget - and that we will have a major deficit of $592 million this fiscal year.

While some elements of the deficit might be excused as not so predictable (the H1N1 flu costs for example), the decrease in corporate income taxes was very predictable. The NDP are getting our province into fiscal trouble because they were not smart last spring when they put together their budget. In short, Mr. Selinger made a $93 million goof in his overestimate of corporate income tax revenue, and now we are seeing the result of his poor management.