Manitoba hires former Bank of Canada governor to review budget law

Manitoba's NDP government is hiring former Bank of Canada governor David Dodge to review the province's controversial balanced budget law, although the examination will not begin until after the April 19 provincial election.

Premier Greg Selinger said Wednesday the law, which constrains the government's ability to raise taxes and penalizes cabinet ministers for running deficits, is due for an update and a broader focus.

"There's social deficits, there's fiscal deficits, there's environmental deficits. I mean, all of these things need to be balanced off with each other," Selinger said.

"If you have high rates of unemployment but you're balancing the budget, you kind of miss the point, right?"

The law formally called the Balanced Budget, Fiscal Management and Taxpayer Accountability Act was introduced by the former Progressive Conservative government and has been a political thorn in the NDP government's side for years.

It forces pay cuts of up to 40 per cent on all cabinet ministers when the government is in deficit. It also requires a referendum before any increase to income, sales or business payroll taxes.

The NDP has been running deficits since 2009 and has changed the law several times limiting the pay cut for cabinet ministers at 20 per cent, allowing for deficits when Crown corporation profits drop sharply and more. Each change has prompted accusations of fiscal mismanagement from the Opposition Progressive Conservatives.

The change that stirred up the most controversy came in 2013, when the government suspended the requirement for a referendum on tax hikes and increased the provincial sales tax to eight per cent from seven.

Selinger said all governments have been grappling with deficits since the economic slowdown of 2008.

"There are times in the economic cycle when you need stimulus. Right now, we're hearing that's the global consensus of the economists and all the major economic agencies like the IMF (International Monetary Fund)."

Dodge brings a wealth of experience, Selinger said, and is respected around the world.

Dodge was hired last year by the NDP government in Alberta to advise on the best level of infrastructure spending in the coming years. He was governor of the Bank of Canada from 2001 to 2008, and was a deputy finance minister with the federal Liberal government in the 1990s.

Opposition PC Leader Brian Pallister has promised to restore some of the balanced budget provisions that were removed by the NDP.

"Sustainable money management is something we all have to do on our own ... and governments shouldn't be different," Pallister said.

Dodge will begin his work in May possibly under a new government and is expected to issue his report within a year.