Province Of Manitoba 18-K/A Annual report (foreign governments) (amended)

Budget Paper B

FINANCIAL REVIEW AND
STATISTICS

FINANCIAL REVIEW AND STATISTICS

Contents

INTRODUCTION	2
Update on Summary Budgeting	2
The Summary Budget and the Operating Fund	3
Section 1
REPORT ON SUMMARY BUDGET PROJECTION AND OPERATING FUND RESULTS	5
2005/06 Forecast Results	5
Summary Comparative Statement, 2005/06	7
Medium-Term Summary Budget Projection	8
Summary Budget Projections to 2009/10	9
Operating Fund	9
Total Changes in Special Funds	9
Contributions of Government Enterprises and Crown Organizations	10
Consolidation Adjustments	10
Pension Items	11
Summary Net Income	11
Section 2
OPERATING FUND OVERVIEW	12
2005/06 FORECAST RESULTS	14
Revenue	14
Expenditure	14
Net Revenue	14
Comparative Statement of Budgetary Revenue, Expenditure, Transfers and Balance, 2005/06	15
Balance under Balanced Budget Legislation	15
2006/07 BUDGET	16
Revenue	16
Expenditure	16
Net Revenue	16
Balance under Balanced Budget Legislation	16
Comparative Statement of Budgetary Revenue, Expenditure, Transfers and Balance, 2006/07 and 2005/06	17
Provincial Revenue, 2006/07, Major Sources	18
Revenue by Source, 2006/07 and 2005/06	18
Revenue Estimates	19
Provincial Operating Expenditure, 2006/07, Major Categories	20
Program Expenditure Estimates, 2006/07 and 2005/06	20
Operating Expenditure Estimates	21

SPECIAL FUNDS BALANCES	22
Fiscal Stabilization Fund	22
Debt Retirement Fund	23
Pension Assets Fund	24
CAPITAL INVESTMENT — REPLACEMENT VALUE OF PUBLIC ASSETS	25
CAPITAL INVESTMENT	26
LOAN ACT REQUIREMENTS	28
BORROWING REQUIREMENTS	29
Statement of Provincial Borrowings, Guarantees and Obligations	30
Provincial Borrowings, Guarantees and Obligations	31
Section 3
MANITOBA FINANCIAL STATISTICS, TEN-YEAR SUMMARY	32
Restatement of Summary Net Debt: Adjustments for Accounting Policy Changes	36
Glossary of Terms	37
MANITOBA SUMMARY BUDGET STATISTICS	40
MANITOBA’S RELATIVE POSITION AMONG PROVINCES	42
Section 4
IMPROVING TRANSPARENCY AND ACCOUNTABILITY	44
IMPROVED REPORTING	44
CAPITAL ACQUISITIONS AND INFRASTRUCTURE CAPITALIZATION	45
PENSION ACCOUNTING	45

B2 / Financial Review and Statistics     BUDGET 2006

n INTRODUCTION

In 2004, the government of Manitoba announced that it would change the way in which it presents and reports its Budget for the 2007/08 fiscal year, making the Summary Budget the focus of its presentation to Manitobans. The Summary Budget statement integrates the plans for the consolidated operations of the government, including those of government enterprises and other Crown organizations in the wider Government Reporting Entity (GRE).

This approach will bring Manitoba in line with the new accounting standards in Canada that require provincial governments to report on the broader definition of government as prescribed by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA).

Update on Summary Budgeting

As announced in the 2005 Budget Address, the Steering Committee comprised of government officials and the Office of the Auditor General, is developing a plan to implement Summary Budgeting and Reporting on a full generally accepted accounting principles (GAAP) basis for 2007/08. In May 2005, the consulting firm of Deloitte was hired to work with the Steering Committee and provide expertise and advice on how to manage this transition.

Over the course of the summer and fall, the consultants met with representatives of government departments and agencies, including public schools, to review the current accounting structures and practices, and to assist with the development of an implementation plan.

They have noted that the GRE, reviewed and expanded for 2005/06, includes several new entities, and significant changes are required to fully implement summary budgeting and reporting for 2007/08. In particular, Manitoba’s public school divisions report on the FRAME (Financial Reporting and Accounting in Manitoba Education) basis of accounting, and it is not possible to generate GAAP-compliant information for them in the short term. Ensuring that public schools financial reporting becomes fully compliant will entail much work over the next two years. Personnel and system resources to address these issues will be required during the transition to summary budgeting and reporting for 2007/08. The consultants are completing a step-by-step approach to meet the challenges of summary budgeting and reporting. The consultants also noted that Manitoba’s legislation governing financial management and reporting will need to be updated to reflect the new standards.

Beyond Summary Budget issues, evolving PSAB standards mean additional information will be included in the Financial Statements for 2005/06, which will be released later this year. Section 4 of this Budget Paper includes information on environmental liabilities and the new GRE.

The information presented in this Budget Paper will, for the most part, be consistent with the presentation format found in the 2005 Budget Paper.

BUDGET 2006    Financial Review and Statistics / B3

The Summary Budget and the Operating Fund

The Summary Budget projects the financial results of the entire provincial Government Reporting Entity (see Glossary of Terms, Page B37). It encompasses not only the core operations and activities of government, but also the results of Crown enterprises like Manitoba Hydro and Manitoba Public Insurance, and other entities such as the University of Manitoba, health care institutions, community colleges and child welfare agencies. Public schools are not included in this presentation, but are scheduled to be in the future.

The purposes and the mandates of the entities included in the GRE are generally set by legislation and the operations are directed by independent boards. It is extremely difficult or not practical for government to respond immediately to financial set-backs resulting from, for example, the effect of severe weather conditions on Manitoba Hydro, or the Manitoba Agricultural Services Corporation (MASC). In some cases, revenue-related adjustments such as auto insurance premium and hydroelectricity rate increases are subject to review by the Public Utilities Board. Even though the government maintains a balance between revenues and expenditures for its departmental and other core operations, should a Crown organization or enterprise realize abnormal adverse results, it could negatively affect the Summary results and, perhaps, create a Summary deficit.

Current balanced budget legislation (BBL) only addresses the Operating Fund, which is under the direct control of the government through the budget process. Unfavourable results in revenue generation can be offset by expenditure reductions, revenue rate adjustments, interfund transfers or other temporary measures.

As the Manitoba government moves toward making the Summary Budget the primary budget reporting tool, it must develop a balanced budget test that credibly and appropriately reflects the goals of maintaining a balance of financial responsibility and discipline to protect essential services along with stable and competitive tax rates.

At present the government is required, by legislation, to present a budget and report financial results for the Operating Fund. The 2006 Budget, however, provides a forecast of summary financial results of the GRE (excluding public schools). This Budget Paper also reports on the financial results of core government operations and its financial position, as well as providing detail with respect to the government’s Budget for the coming fiscal year and for the medium term.

B4 / Financial Review and Statistics    BUDGET 2006

This Budget Paper is divided into four sections.

Section 1

This section provides Summary Budget statements that incorporate results and plans for the consolidated operations of the government, including the operations of government enterprises and Crown organizations, as well as changes in pension liabilities. It also provides Operating Fund result projections for the years 2006/07 through 2009/10, consistent with the presentation in last year’s Budget Paper.

Section 2

This section provides information on the core functions of the government specifically required by the Legislature. This includes estimates of operating expenditure, operating revenue and balances under BBL, as well as capital investment and loan authority. Section 2 summarizes the Estimates of Revenue and the Estimates of Expenditure that are voted upon by the Legislature. BBL provides specific mechanisms for the stabilization of provincial finances and repayment of debt through the Debt Retirement Fund. Information on provincial borrowings and on the Manitoba Financial Statistics have been revised to provide the reader with a clearer understanding of the various components of the government’s obligations. A Glossary of Terms has been provided in Section 3 to assist the reader.

Section 3

This section provides additional financial information on the Operating Fund. The Financial Statistics pages present a multi-year summary of the Operating Fund financial results and include ratios with respect to Gross Domestic Product and per capita information. A new Summary Net Debt presentation has been developed which presents a more comprehensive view of debt. This section also includes a Glossary of Terms that explains the terms used in this Budget Paper. Interprovincial comparisons are provided with respect to health and total program expenditures, debt servicing costs and debt. It is expected that Section 3 will undergo changes next year to reflect the government’s Summary Budget presentation.

Section 4

This section provides a summary of the progress government has made in its budgeting and reporting. These improvements reflect its commitment to greater transparency and to meeting the standards of reporting advanced by PSAB. A brief note explains environmental liabilities and the anticipated accounting treatment of excluding public schools from the GRE over the next two years.

Note: The forecast results for 2005/06 presented in this Budget are based on the province’s Third Quarter Financial Report.

Interested parties are encouraged to access all the reports of the Government of Manitoba which are provided for the information of the Legislature and the public. Links may be found on the internet at http://www.gov.mb.ca/finance.

BUDGET 2006    Financial Review and Statistics / B5

SECTION 1

n REPORT ON SUMMARY BUDGET PROJECTION AND OPERATING FUND RESULTS

The Summary Budget presents Manitobans with a picture of the financial activities of the GRE (excluding public schools). It provides information on the balance under BBL, the changes in the balances of Special Funds, net contributions of government enterprises and Crown organizations, and changes in pension liability and pension fund assets.

The Operating Fund balance, along with the necessary transfers to or from the Debt Retirement Fund and the Fiscal Stabilization Fund, yield the balance under BBL. Positive balances must be transferred to the Fiscal Stabilization Fund.

For the purpose of calculating the Summary Budget Forecast, the following items must be included to arrive at Summary Net Income:

• total changes in Special Funds;

• contributions of government enterprises and Crown organizations;

• consolidation adjustments; and

• pension items.

These adjustments are explained in the pages following the Medium-Term Summary Budget Projection table.

2005/06 Forecast Results

Note: The forecast results for 2005/06 presented in this Budget are based on the province’s Third Quarter Financial Report.

A positive $26 million result is forecast for the Operating Fund in 2005/06, down $86 million from the 2005 Budget projection.

Own-source revenue is forecast to be $123 million higher than Budget levels, and federal transfers are forecast to be $65 million higher as a result of a partial recovery of expenditures under the disaster financial assistance agreement as well as contributions related to the child care agreement signed with the federal government. In total, revenue is forecast to be $189 million higher than budgeted.

In total, expenditure is projected to be $275 million higher than budget. Unanticipated expenditures associated with flooding, heavy rains and wind storms during the spring and early summer for disaster assistance programs and the Canadian Agricultural Income Stabilization (CAIS) program are forecast to total $105 million; health expenditures are up $87 million over the Budget projection including $18 million in expenditures for wait time reduction programming.

B6 / Financial Review and Statistics     BUDGET 2006

Cost pressures in the Departments of Family Services and Housing (primarily for services for persons with disabilities), in Advanced Education and Training (for universities), as well as higher road maintenance and winter road costs are forecast to exceed Budget projection by $40 million.

The year-end positive balance for 2005/06 is forecast to be consistent with the budgeted level after a draw from the Fiscal Stabilization Fund of up to $68 million for general requirements and $18 million for wait time reduction programs.

Manitoba’s government enterprises and other Crown organizations, led by Manitoba Hydro, are expected to generate net profits of $830 million in 2005/06, $116 million more than budgeted. Once consolidation adjustments are factored in, their contribution to Summary Net Income is expected to be $348 million. The financial performance of these Crown enterprises underlines their importance to the province’s summary financial position.

In 2005/06, Summary Net Income is expected to be $251 million, or $55 million more than projected in the 2005 Budget.

BUDGET 2006     Financial Review and Statistics / B7

SECTION 1

Summary Comparative Statement, 2005/06

	2005/06			2005/06
	Budget			Forecast			Difference
	(Millions of Dollars)
Operating Fund Result		113			26			(86	)
Interfund Transfers/Debt Retirement
Debt retirement payment		(110	)		(110	)		0
Fiscal Stabilization Fund
General Requirements		0			68			68
Wait Time Reduction/Health Programming		0			18			18
Balance under BBL/Transfer to Fiscal Stabilization Fund		3			3			0
Special Funds (Changes in Balance)
Debt Retirement Fund		27			25			(2	)
Fiscal Stabilization Fund		14			(72	)		(86	)
Other		0			0			0
Total Changes in Special Funds		41			(47	)		(88	)
Government Enterprises and Crown Organizations
Government Business Enterprises
Manitoba Hydro		210			375			165
Manitoba Public Insurance		8			46			38
Manitoba Lotteries Corporation		271			273			2
Manitoba Liquor Control Commission		187			192			5
Special Operating Agencies		12			15			3
Manitoba Agricultural Services Corporation		(22	)		(145	)		(123	)
Other Crown Organizations and Enterprises		50			75			25
Consolidation Adjustments		(475	)		(482	)		(7	)
Net Enterprises and Organizations		242			348			107
Net Pension Items		(87	)		(51	)		36
Summary Net Income (Summary Budget)		196			251			55

Totals may not add due to rounding.

B8 / Financial Review and Statistics     BUDGET 2006

Medium-Term Summary Budget Projection

(Millions of Dollars)

							FOR
							ILLUSTRATION
	2005/06			2006/07			2007/08			2008/09			2009/10
	forecast			Budget			Projection			Projection			Projection
Revenues		8,365			8,651			8,911			9,201			9,539
Expenditures		(8,339	)		(8,622	)		(8,842	)		(9,117	)		(9,452	)
Operating Fund Result		26			29			68			85			88
Interfund Transfers/Debt Retirement
Debt retirement payment		(110	)		(110	)		(110	)		(110	)		(110	)
Fiscal Stabilization Fund
General Requirements		68			55			0			(1	)		(4	)
Wait Time Reduction/Health Programming		18			30			45			30			30
Total Interfund Transfers		(24	)		(26	)		(65	)		(82	)		(85	)
Balance under BBL/Transfer to Fiscal Stabilization Fund		3			3			3			3			3
Special Funds (Changes in Balance)
Debt Retirement Fund		25			26			28			29			30
Fiscal Stabilization Fund		(72	)		(70	)		(30	)		(14	)		(42	)
Other		0			(2	)		(2	)		(2	)		(2	)
Total Changes in Special Funds		(47	)		(45	)		(4	)		13			(14	)
Government Enterprises and Crown Organizations
Government Business Enterprises
Manitoba Hydro		375			222			123			132			135
Manitoba Public Insurance		46			10			10			11			9
Manitoba Lotteries Corporation		273			267			267			267			267
Manitoba Liquor Control Commission		192			196			201			206			211
Special Operating Agencies		15			14			15			15			15
Manitoba Agricultural Services Corporation		(145	)		(3	)		5			8			8
Other Crown Organizations and Enterprises		75			41			45			46			46
Consolidation Adjustments		(482	)		(481	)		(488	)		(493	)		(499	)
Net Enterprises and Organizations		348			265			177			191			193
Pension Expense for Unfunded Liability		(195	)		(197	)		(199	)		(201	)		(203	)
Increase in Pension Assets Fund		144			125			138			146			158
Summary Net Income (Summary Budget)		251			148			112			149			134

Totals may not add due to rounding.

2007/08 to 2009/10 are presented for illustration purposes only. This presentation will change when government fully implements Summary Budget reporting. Work has begun on this initiative as described on page B2.

BUDGET 2006     Financial Review and Statistics / B 9

Summary Budget Projections to 2009/10

The medium-term Summary Budget projections indicate a positive balance under BBL as well as positive Summary Net Income. The steady growth in revenue projected for Manitoba is based on a forecast of continued national and provincial economic growth.

Operating Fund

Operating fund revenue growth over the medium term is expected to average 3.3% per annum to 2009/10. Federal transfers are projected to increase by an average of 3.9%, reflecting expected growth in major transfer program entitlements under programs such as Equalization, Canada Health Transfer and Canada Social Transfer. Own-source revenues are projected to grow by an average of 3.0% in the medium term. This growth occurs against the backdrop of steady economic growth for Manitoba and Canada and incorporates announced tax reductions. According to the latest projections from the Conference Board of Canada, Manitoba’s economic GDP growth will average 4.1% over the medium term.

Expenditures are projected to increase at an average annual rate of 3.1% over the medium term, a rate in excess of projected inflation and population growth.

Results for 2007/08, 2008/09 and 2009/10 are presented for illustration purposes only. The presentation of the summary projection will change when government implements Summary Budget reporting next year.

Total Changes In Special Funds

A number of special funds have been created by the Legislature for specific purposes. The two principal ones are the Fiscal Stabilization Fund (FSF) and the Debt Retirement Fund (DRF). There are also a number of small, special-purpose funds – for example, the Mining Community Reserve Fund and the Quarry Rehabilitation Reserve – that in total have little impact on the overall balance for the summary budget.

B10 / Financial Review and Statistics     BUDGET 2006

Contributions Of Government Enterprises and Crown Organizations

This category records the net changes in operating balances (profits or losses) of government enterprises, Crown organizations, and Special Operating Agencies (SOAs) during the fiscal year. The entities having the greatest net impact on the summary financial results are listed. The contributions of other government entities and organizations are provided in aggregate.

For the second year in a row, Manitoba Hydro profits have significantly exceeded levels projected in the provincial Budget. The abnormally high levels of rainfall that negatively impacted on emergency services operations and agricultural support programs in the Operating Fund, also provided Manitoba Hydro with more water power to generate export sales. For 2005/06, Manitoba Hydro’s profits are expected to be $375 million, and $222 million for 2006/07. Profits of between $123 and $135 million are forecast for each of the three following years.

Inclement weather conditions also contributed to the sharp deterioration in the financial results of the MASC, which is forecasting a loss on operations of $145 million, six times more than the amount projected in the 2005 Budget. Assuming weather conditions more consistent with the long-term average, MASC is expected to achieve near break-even results in 2006/07, with future year results becoming positive.

Other enterprises and organizations are expected to maintain their recent average levels of contributions over the medium term.

Consolidation Adjustments

Consolidation adjustments are made to prevent double counting of revenue or expense items between the government and its related entities, specifically:

• The full amount of profits from Manitoba Lotteries Corporation and the Manitoba Liquor Control Commission are included in Operating Fund Revenue, and so are fully included in Consolidation Adjustments.

• Revenue-sharing payments from SOAs are included in Operating Revenue and are also deducted in this entry.

BUDGET 2006     Financial Review and Statistics / B11

SECTION 1

Pension Items

Upon coming into office in 1999, a plan was put into place to retire the General Purpose Debt and to eliminate the government’s pension liability. If the pension liability had not been addressed, it was projected that it would have grown to $8.4 billion by 2028.

The 2000 Budget introduced a comprehensive approach to address both debt and pension obligations, and in the 2002 Budget the plan was enhanced to reduce the term over which the pension liability will be eliminated. The plan provides a formula to determine debt and pension obligation funding, which currently is $110 million per year.

Pension Liability Retirement

For 2005/06, above-average investment returns in the Pension Assets Fund and an increase in contributions from departments and Crown organizations will decrease the net unfunded pension liability by $37 million from Budget projections. Over the medium term, assuming average investment earnings and an allocation from the DRF of $85 million per year, the net pension liability situation will continue to improve.

Summary Net Income

The Summary Budget represents the financial situation for the expanded GRE. Although PSAB GAAP requires the addition of public school divisions to the GRE for fiscal year 2005/06 and later, Manitoba is unable to consolidate the results of public school operations in its Financial Statements for 2005/06 and 2006/07, as explained in Section 4.

Manitoba’s Summary Net Income for 2005/06 is projected to be $251 million, an improvement of $55 million over Budget. Similar to last year, a large part of this positive balance is due to Manitoba Hydro’s operating results, which help offset losses in other entities.

Summary Net Revenue for 2006/07 is projected to total $148 million, and over the period to 2009/10, assuming average results for government enterprises and Crown organizations, the outlook remains positive.

B12 / Financial Review and Statistics     BUDGET 2006

n OPERATING FUND OVERVIEW

Meeting our Commitments, Building Opportunities is what Budget 2006 is all about for the coming year. The Budget meets or exceeds commitments we have made to Manitobans and is balanced under the broad test of summary reporting and the narrower test under BBL.

Equalization payments are expected to increase in 2006/07 in line with the notification provided by the federal government in the fall of 2005. Increases in transfer programs are also included, reflecting the election commitments of the new federal government to address the fiscal imbalance. Pre-paid funds received in 2004/05 to support wait time reductions will be drawn from the Fiscal Stabilization Fund this year to further our progress on shortening waiting lists.

In Budget 2006:

• Medium-term projections indicate continued compliance with BBL for the Operating Fund and future surpluses for the Summary Budget.

• An additional $110 million will be provided to repay outstanding pension liability and General Purpose Debt. Between 1999/2000 and 2006/07, $704 million has been set aside for debt and pension payments. Debt to GDP ratios, as measured by the Dominion Bond Rating Service, declined from 38.7% in 1999/2000 to 33.9% in 2004/05. The summary Net Debt of the Province declined further in 2005/06 and is projected to decline $14 million to $10,638 million.

• In 2005/06 abnormal weather conditions put unanticipated pressure on Manitoba’s finances. Flooding costs due to heavy rains reached $53 million, while Manitoba’s share of payments for the CAIS program doubled to $105 million. In keeping with the Canada-Manitoba agreement on child care, an additional $21 million in federal revenue was received to meet those needs. Funds to reduce wait times – $18 million – will be withdrawn from the FSF. Forecast increases in income tax revenues, Water Power Rentals and other transfers from the federal government fall short of additional requirements in other areas, resulting in an additional draw from the FSF for general purposes of $68 million. A reduced draw of $55 million for general purposes, including infrastructure programs, road maintenance and financing, improved farmland tax support, and improved program support in key areas, is anticipated in 2006/07. A withdrawal of $30 million in prepaid health funds is proposed to address wait time reduction.

• Beginning in 2006/07, a new three-year funding plan for post-secondary education will provide increases of 5.8% to institutions, with 5.0% increases in each of the following two years. Universities will benefit from a reduction in property taxes equivalent to a further 1.2% increase. By 2008/09, colleges and universities will be receiving an extra $60 million annually.

BUDGET 2006     Financial Review and Statistics / B13

SECTION 2

• In 2006, the Residential Education Support Levy is eliminated, saving homeowners $34 million, while farmers will receive rebates offsetting 60% of their school taxes on farmland. In 2006, the middle income tax rate falls to 13.5% and the basic personal amount will increase by $100. In 2007, the middle rate will fall further to 13% and an additional $100 increase in the basic personal amount will be provided.

• In January 2006, the Corporation Income Tax fell to 14.5% and will fall to 14% in July 2007. Within the framework of future balanced budgets, it is anticipated that this rate will drop to 13% in July 2008. The small business rate is now 4.5%. In January 2007, the small business rate will fall to 3% – the lowest rate in Western Canada. The 2006 Budget also details a number of other tax changes we are implementing, including measures to support investment in drilling for oil and gas and to provide increased incentives for investment in equipment and property.

• Municipal governments can expect increased support through the Building Manitoba Fund, and more resources are being dedicated for infrastructure and water protection programs.

• At the end of 2006/07, the balance in the FSF is forecast to be $345 million – $119 million higher than the amount projected for March 31, 2000 in the 1999 Budget.

Budget 2006 keeps the commitments made to Manitobans, meeting obligations to reduce debt and pension liability, investing in key programs and services, providing sustainable tax reductions for individuals and business, and building opportunities for the future.

B14 / Financial Review and Statistics     BUDGET 2006

n 2005/06 FORECAST RESULTS

Note: The forecast results for 2005/06 presented in this Budget Paper are based on the province’s Third Quarter Financial Report.

Revenue

Revenue in 2005/06 is forecast to be $189 million, or 2.3%, higher than projected in the 2005 Budget.

Own-source revenue is expected to be $123 million higher than projected, largely reflecting stronger income tax revenue associated with a higher than forecast growth in incomes. Together, corporation and individual income tax revenue is expected to be $84 million above that projected at the time of the 2005 Budget. High water flows associated with last year’s above-normal precipitation also boosted Water Power Rentals by $19 million, or 18.1%, higher than previously budgeted levels. Increased revenues from these and other sources were partly offset by lower collections elsewhere.

Total revenue from federal transfers is forecast to be $65 million, or 2.3%, above the amount projected in the 2005 Budget. This result is largely due to two factors. First, the federal government is expected to provide $46 million in disaster financial assistance to help offset Manitoba’s extra emergency expenditures. Second, the agreement signed with the federal government on early learning and child care provided additional revenue of $21 million, relative to the 2005 Budget Estimates.

Expenditure

Expenditure in 2005/06 is expected to be $275 million, or 3.4%, above 2005 Budget projections. The largest contributing factor to this was the abnormal weather conditions experienced in the province over the course of 2005, including above-average levels of precipitation, widespread flooding, drought and severe windstorms. Emergency expenditures are forecast to be $51 million higher than budgeted. As well, support for Manitoba farmers through the CAIS program is expected to be higher by $52 million. Higher than budgeted expenditures were also reported by the departments of Health ($87 million), Family Services and Housing ($16 million), and Transportation and Government Services ($12 million).

Unallocated debt servicing costs are forecast to be $269 million in 2005/06, unchanged from the 2005 Budget projection.

Net Revenue

After accounting for higher revenue and expenditure, net revenue is expected to be $26 million, down $86 million from the figure projected in the 2005 Budget.

BUDGET 2006     Financial Review and Statistics / B15

SECTION 2

Comparative Statement of Budgetary Revenue,
Expenditure, Transfers and Balance
2005/06

							Increase/(Decrease)
	2005/06			2005/06			From Budget
	Forecast			Budget			to Forecast
	(Millions of Dollars)						(Millions of Dollars)			%
Revenue
Taxation		4,631			4,537			94			2.1
Other		873			843			30			3.5
Total Own Source		5,504			5,380			123			2.3
Federal Transfers		2,862			2,796			65			2.3
Total Revenue		8,365			8,177			189			2.3
Expenditure
Program		8,070			7,795			275			3.5
Debt Servicing		269			269			0
Total Expenditure		8,339			8,064			275			3.4
Net Revenue/(Expenditure)		26			113			(86	)		(76.1	)
Debt/Pension Repayment		(110	)		(110	)		0
Fiscal Stabilization Fund
General Requirements		68			0			68
Health Wait Time Programs		18			0			18
Balance under BBL		3			3			0

Totals may not add due to rounding.

Balance under Balanced Budget Legislation

The balance under BBL is forecast to be $3 million in 2005/06, in line with the 2005 Budget projection. This result includes $110 million for the repayment of debt and retirement of pension liabilities, and a draw from the FSF of up to $68 million for general programs and $18 million for wait time reduction programs.

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n 2006/07 BUDGET

Revenue

Revenue in 2006/07 is projected to be $290 million, or 3.5%, higher than forecast for 2005/06. Own-source revenue is expected to grow by $152 million, or 2.8%, even with our government’s commitment to reduce personal income and business taxes. Manitoba’s continued robust economic performance is expected to generate higher incomes, more jobs and continued investment. Federal transfers are expected to grow by $138 million, or 4.8%, in line with commitments on Equalization and health and social transfers.

Expenditure

Total budgetary expenditure is projected to be $286 million, or 3.4%, more than forecast for 2005/06. The largest departmental increases are budgeted for Health ($149 million or 4.3%), and Education and Advanced Education ($96 million or 5.5%). Substantial savings are expected in the Agriculture, Food and Rural Initiatives Department as the negative impacts of BSE, floods and adverse weather conditions subside.

Net Revenue

After accounting for higher revenue and expenditure, net revenue is projected to be $29 million, about the same as forecast for the current year.

Balance under Balanced Budget Legislation

The balance under BBL is forecast to be $3 million in 2006/07. This result includes $110 million for the repayment of debt and retirement of pension liabilities, as well as a draw from the FSF of up to $55 million for general programs and $30 million for wait time reduction programs.

BUDGET 2006     Financial Review and Statistics / B17

SECTION 2

Comparative Statement of Budgetary Revenue,
Expenditure, Transfers and Balance
2006/07 and 2005/06

										Increase/						Increase/
										(Decrease)						(Decrease)
										from 2005/06						from 2005/06
										Budget						Forecast
	2006/07			2005/06			2005/06			to 2006/07						to 2006/07
	Budget			Forecast			Budget			Budget						Budget
				(Millions of						(Millions			%			(Millions			%
				Dollars)						of Dollars)						of Dollars)
Revenue
Taxation		4,786			4,631			4,537			248			5.5			155			3.3
Other		866			868			831			34			4.1			(3	)		(0.3	)
Total Own Source		5,651			5,499			5,369			282			5.3			152			2.8
Federal Transfers		3,000			2,862			2,796			204			7.3			138			4.8
Total Revenue		8,651			8,361			8,165			486			6.0			290			3.5
Expenditure
Program		8,405			8,082			7,862			543			6.9			323			4.0
Budgeted Lapse		(65	)		(15	)		(65	)		—			—			(50	)		—
Debt Servicing		282			269			269			13			4.8			13			4.8
Total Expenditure		8,622			8,336			8,066			556			6.9			286			3.4
Net Revenue/ (Expenditure)		29			25			99			(70	)		(70.8	)		4			16.6
Debt/Pension Repayment		(110	)		(110	)		(110	)		0						0
Fiscal Stabilization Fund
General Requirements		55			68			0			55						(13	)
Health Wait Time Programs		30			18			0			30						12
Restatement Adjustment *		0			2			14			(14	)					2
Balance under Balanced Budget Legislation		3			3			3			0						0

* The 2005/06 financial information has been restated to be consistent with the 2006/07 Estimates structure. Adjustments to 2005/06 Budget include a decrease of $12 million in own source revenue related to the cottaging initiative and a net increase of $2 million in expenditures comprised of $4 million for an adjustment to amortization for infrastructure assets and a decrease of $2 million for the cottaging initiative. Adjustments to 2005/06 Forecast include a decrease of $5 million in revenue and a decrease in expenditure of $3 million for the cottaging initiative. Adjustments to the cottaging initiative are to reflect amendments to GAAP to include inventory accounting.

Totals may not add due to rounding.

B18 / Financial Review and Statistics     BUDGET 2006

Provincial Revenue, 2006/07
Major Sources
Per cent of Total

Revenue by Source
2006/07 and 2005/06

	2006/07		2005/06		Change 2006/07
	Budget		Forecast1		from 2005/06 Forecast
	(Millions of Dollars)				(Millions of Dollars)
Total Taxation		4,786		4,631		155
Other Revenue		866		868		(3	)
Own-Source Revenue		5,651		5,499		152
Government of Canada		3,000		2,862		138
Total Revenue		8,651		8,361		290

Note 1: The 2005/06 information has been adjusted to be consistent with the 2006/07 Estimates structure.

Totals may not add due to rounding.

BUDGET 2006     Financial Review and Statistics / B19

SECTION 2

Revenue Estimates
(Thousands of Dollars)

							Per cent Change
							2006/07 from
	2006/07		2005/06		2005/06		2005/06		2005/06
	Budget		Forecast1		Budget1		Budget		Forecast
§Own-Source Revenue Income Taxes
Income Taxes
• Individual Income Tax		2,004,200		1,948,701		1,876,900
• Corporation Income Tax		396,100		377,606		365,600
Subtotal		2,400,300		2,326,307		2,242,500		7.0		3.2
Taxes, Levies and Collections
• Corporation Capital Tax		174,600		167,500		167,500
• Gasoline Tax		155,300		154,500		155,500
• Insurance Corporations Tax		59,500		57,605		54,000
• Land Transfer Tax		32,600		29,810		24,000
• Levy for Health and Education		312,100		299,300		294,300
• Mining Tax		41,000		50,000		57,200
• Motive Fuel Tax		80,500		81,000		78,000
• Oil and Natural Gas Tax		5,176		4,521		2,720
• Retail Sales Tax		1,244,100		1,185,800		1,180,800
• Revenue Act, 1964, Part 1		82,200		79,800		73,800
• Tobacco Tax		195,000		191,700		203,700
• Other Taxes		3,272		3,272		3,272
Subtotal		2,385,348		2,304,808		2,294,792
Total Taxation Revenue		4,785,648		4,631,115		4,537,292		5.5		3.3
Fees and Other Revenue
• Fines and Costs and Other Legal		38,311		34,692		33,859
• Minerals and Petroleum		8,337		11,693		6,495
• Automobile and Motor Carrier Licences and Fees		97,998		97,998		97,998
• Drivers’ Licences		17,916		17,916		17,916
• Water Power Rentals		106,000		124,000		105,000
• Parks, Forestry, and Other Conservation		32,913		28,436		27,203
• All Other Manitoba Collections		80,686		70,597		67,910
Subtotal		382,161		385,332		356,381
Crown Corporations/Entities
• Manitoba Lotteries Corporation		267,000		273,000		271,000
• Manitoba Liquor Control Commission		196,000		191,700		187,000
• Other		20,395		18,070		17,005
Subtotal		483,395		482,770		475,005
Total Other Revenue		865,556		868,102		831,386		4.1		(0.3	)
§ Federal Transfers
• Equalization		1,690,300		1,601,018		1,601,000
• Canada Health Transfer (CHT)		765,300		725,813		726,400
• Canada Social Transfer (CST)		369,060		319,956		320,100
• Child Care		23,683		25,612		5,000
• Health Funds		19,781		24,528		26,452
• Other Transfers		131,708		164,598		117,370
Total Federal Transfers		2,999,832		2,861,525		2,796,322		7.3		4.8
§ Total Budgetary Revenue		8,651,036		8,360,742		8,165,000		6.0		3.5

Note 1: The 2005/06 information has been adjusted to be consistent with the 2006/07 Estimates structure.

B20 / Financial Review and Statistics     BUDGET 2006

Provincial Operating Expenditure, 2006/07
Major Categories
Per cent of Total

Program Expenditure Estimates
2006/07 and 2005/06

	2006/07		2005/06		Change 2006/07
	Budget		Forecast1		from 2005/06 Forecast
	(Millions of Dollars)				(Millions of Dollars)
Health		3,607		3,458		149
Advanced Education and Training		596		566		31
Education, Citizenship and Youth		1,245		1,180		65
Family Services and Housing		1,034		985		49
Other Departments		1,922		1,893		29
Total Program Expenditure Estimates		8,405		8,082		323

Note 1: The 2005/06 information has been adjusted to be consistent with the 2006/07 Estimates structure.

Totals may not add due to rounding.

SECTION 2

BUDGET 2006     Financial Review and Statistics / B21

Operating Expenditure Estimates
(Thousands of Dollars)

										Per cent Change
										2006/07 from
	2006/07			2005/06			2005/06			2005/06		2005/06
	Budget			Forecast1			Budget1			Budget		Forecast
§ Health		3,606,901			3,458,183			3,389,294			6.4		4.3
§ Education
• Advanced Education and Training		596,417			565,555			558,244
• Education, Citizenship and Youth		1,245,270			1,180,091			1,185,356
Total Education		1,841,687			1,745,646			1,743,600			5.6		5.5
§ Family Services and Housing		1,034,451			985,024			972,199			6.4		5.0
§ Community, Economic and Resource Development
• Aboriginal and Northern Affairs		33,984			32,940			32,940
• Agriculture, Food and Rural Initiatives		181,095			218,287			174,453
• Conservation		113,567			107,189			108,218
• Energy, Science and Technology		60,151			58,433			58,807
• Industry, Economic Development and Mines		29,184			33,942			29,210
• Intergovernmental Affairs and Trade		251,418			223,014			222,262
• Transportation and Government Services		408,353			400,560			393,389
• Water Stewardship		50,306			47,960			48,468
• Enabling Appropriations		71,708			46,047			16,530
• Other Appropriations		25,805			76,410			25,805
Total Community, Economic and Resource Development		1,225,571			1,244,782			1,110,082			10.4		(1.5	)
§ Justice and Other Government
• Legislative Assembly		28,925			27,368			26,620
• Executive Council		2,633			2,602			2,602
• Civil Service Commission		5,009			4,336			4,659
• Culture, Heritage and Tourism		71,202			69,723			69,941
• Employee Pensions and Other Costs		80,215			74,598			74,255
• Finance		102,009			98,837			101,094
• Healthy Child Manitoba		25,831			24,614			24,914
• Justice		297,906			288,561			285,733
• Labour and Immigration		35,268			31,372			31,194
• Manitoba Seniors and Healthy Aging Secretariat		1,130			921			921
• Sport		11,415			11,154			11,155
• Enabling Appropriations		35,050			14,342			14,174
Total Justice and Other Government		696,593			648,428			647,262			7.6		7.4
§ Total Program Expenditures		8,405,203			8,082,063			7,862,437			6.9		4.0
§ Unallocated Debt Servicing Costs		282,000			268,984			268,984			4.8		4.8
§ Total Expenditure Estimates		8,687,203			8,351,047			8,131,421			6.8		4.0
§ Less: Year-End Lapse		(65,000	)		(15,000	)		(65,000	)
§ Total Budgetary Expenditure		8,622,203			8,336,047			8,066,421			6.9		3.4

Note 1: The 2005/06 information has been adjusted to be consistent with the 2006/07 Estimates structure.

B22 / Financial Review and Statistics     BUDGET 2006

n SPECIAL FUNDS BALANCES

Fiscal Stabilization Fund

The presentation of the FSF balance has been modified to reflect the deposit into the Fund of $210 million in pre-funding of health programming in 2004/05. The Fund will now report on health programs and general programs component revenues, expenditures and balances.

The FSF is projected to have a total balance of $414 million as at March 31, 2006, after a draw of $68 million for general requirements and $18 million for wait time reduction programming. The health programs component balance will be $198 million, while the general programs component will end 2005/06 with a $216 million balance.

The budgeted draw in 2006/07 is $55 million for general requirements and $30 million for wait time reduction programming. The health programs component balance at March 31, 2007 is budgeted at $174 million. The general programs component will end 2006/07 with a $171 million balance.

Fiscal Stabilization Fund
Revenue, Expenditure and Balance
Projection as at March 31, 2007 and March 31, 2006

	2006/07			2005/06
	Budget			Forecast
	(Millions of Dollars)
Total Fund Balance, Beginning of Year		414			486
Health Programs
Fund Balance, Beginning of Year		198			210
Interest Earnings		6			6
Transfer from/(to) the Operating Fund Wait Time Reduction Programming		(30	)		(18	)
Other Health Related Programming		—			—
Fund Balance, End of Year		174			198
General Programs
Fund Balance — Beginning of Year		216			276
Interest Earnings		6			6
Transfer from/(to) the Operating Fund Year-end Positive Balance		3			3
General Requirements		(55	)		(68	)
Fund Balance, End of Year		171			216
Total Fund Balance, End of Year		345			414

Totals may not add due to rounding.

BUDGET 2006   Financial Review and Statistics / B23

SECTION 2

Debt Retirement Fund

In accordance with The Balanced Budget, Debt Retirement and Taxpayer Accountability Act, a $110 million deposit to the DRF is required in 2005/06. In 2006/07, a deposit of $110 million will be made to the Fund.

As required by legislation, the Fund was collapsed in 2004/05, leaving a nil balance at the beginning of 2005/06. The Allocation Committee has determined that $85 million of the deposit will be transferred to the Pension Assets Fund, leaving a balance of $25 million at March 31, 2006.

Interest earnings for 2006/07 are expected to be approximately $1 million.

For 2006/07 it is assumed that the allocation will be $85 million to pension liability.

Debt Retirement Fund

Revenue, Expenditure and Balance
Projection as at March 31, 2007 and March 31, 2006

	2006/07			2005/06
	Budget			Forecast
	(Millions of Dollars)
Fund Balance, Beginning of Year		25			—
Revenue
Transfer from Operating Fund		110			110
Interest		1			—
		111			110
Expenditure
Transfer to Pension Assets Fund		(85	)		(85	)
Transfer to Sinking Fund		—			—
Fund Balance, End of Year		51			25

B24 / Financial Review and Statistics   BUDGET 2006

Pension Assets Fund

It is anticipated that $85 million will be allocated to the Pension Assets Fund for 2006/07.

The Fund will have net investment earnings of $51 million in 2005/06. The Budget projects a return of $32 million in 2006/07.

The Fund is expected to have a balance of $651 million by the end of the 2006/07 fiscal year.

Pension Assets Fund

Receipts, Expenditure and Balance
Projection as at March 31, 2007 and March 31, 2006

	2006/07		2005/06
	Budget		Forecast
	(Millions of Dollars)
Fund Balance, Beginning of Year		526		382
Contributions
Debt Retirement Fund		85		85
Net Investment Earnings		32		51
Departments and Crown Corporations		8		8
		125		144
Fund Balance, End of Year		651		526

BUDGET 2006   Financial Review and Statistics / B25

SECTION 2

g CAPITAL INVESTMENT – REPLACEMENT VALUE OF PUBLIC ASSETS

Over the years, Manitoba’s communities and the economy have benefited from many investments in general assets such as schools, health facilities and public service buildings, as well as infrastructure assets such as roads, water control structures and parks. These assets have contributed to vital public services, including learning, health, physical access and electronic access to other government programs, as well as providing the infrastructure for economic and community development. The public good provided by these investments is immeasurable; however, it is estimated that the insured or replacement value of these investments exceeds $25 billion, an increase of $2 billion.

Replacement Value of Public Assets¹

Per cent of Total

Totals may not add due to rounding.

B26 / Financial Review and Statistics   BUDGET 2006

g CAPITAL INVESTMENT

Provincially owned capital assets such as highways, waterways, buildings, machinery and computer systems are amortized over their useful life based on established guidelines for amortization (see Appendix B of the 2006/07 Estimates of Expenditure). The amortization and interest costs are borne by departments that are responsible for each asset and are reflected as annual costs related to capital assets. Capital grants are also provided to third parties such as municipalities, schools and universities as contributions toward capital projects. In total, costs related to capital assets are estimated at $452 million in 2006/07, an increase of $32 million from 2005/06.

Authority for the annual cost to acquire provincially owned assets is reflected as Part B – Capital Investment which totals $322 million in 2006/07, an increase of $96 million from 2005/06, largely due to $52 million for floodway expansion, $20 million for increased investment in provincial roads and highways, and $14 million for investment in provincially owned buildings and equipment.

Capital Grants and Costs Related to Capital Assets, 2006/07
(Thousands of Dollars)

	2006/07		2005/06
	Budget		Budget1
Capital Grants		251,142		227,217
Infrastructure Assets		139,607		134,739
General Assets		60,903		58,002
		451,652		419,958

Note 1: The 2005/06 information has been adjusted to be consistent with the 2006/07 Estimates structure.

BUDGET 2006   Financial Review and Statistics / B27

SECTION 2

Capital Investment, 2006/07
(Thousands of Dollars)

	2006/07		2005/06
	Budget		Budget1
General Assets
Government Services Capital Projects		23,442		15,564
Transportation Equipment and Other Capital		20,394		13,945
Information Technology Projects
Corporate Information Technology Projects		18,675		9,238
Transportation and Government Services		2,581		3,280
Finance		2,479		344
Family Services and Housing		1,865		2,341
Health		1,275		3,583
Advanced Education and Training		—		3,538
Other Projects		2,099		3,032
Other Equipment and Buildings		3,023		2,924
		75,833		57,789
Infrastructure Assets
Manitoba Floodway Expansion		108,423		56,100
Provincial Roads, Highways and Airport Infrastructure		116,343		95,893
Parks, Cottage and Camping Projects		10,790		6,351
Water Stewardship Projects		10,425		8,000
Other Infrastructure Projects		—		2,000
		245,981		168,344
Total Capital Investment		321,814		226,133

Note 1: The 2005/06 information has been adjusted to be consistent with the 2006/07 Estimates structure.

B28 / Financial Review and Statistics   BUDGET 2006

g LOAN ACT REQUIREMENTS

The following table reflects expenditure authority to be included in The Loan Act, 2006.

Incremental Capital Authority Requirements for

Non-Budgetary Programs, 2006/07
(Thousands of Dollars)

The Loan Act, 2006

Manitoba Agricultural Services Corporation	98,252
Health Capital Program	27,163
Manitoba Student Financial Assistance Program	21,298
Manitoba Housing and Renewal Corporation	10,575
Manitoba Industrial Opportunities Program	9,822
The Manitoba Water Services Board	9,700
Special Operating Agencies Financing Authority — Fleet Vehicles Agency	8,300
Rural Economic Development Initiatives	5,114
Communities Economic Development Fund	3,800
Venture Manitoba Tours Ltd.	250
Manitoba Potash Corporation	125
	194,399

Non-Budgetary Capital Program, 2006/07
(Thousands of Dollars)

Manitoba Hydro	677,000
Health Capital Program	248,743
Manitoba Agricultural Services Corporation	118,100
University of Manitoba	75,000
Manitoba Lotteries Corporation	51,200
Manitoba Industrial Opportunities Program	49,450
Manitoba Housing and Renewal Corporation	43,571
Manitoba Student Financial Assistance Program	38,900
Manitoba Opportunities Fund	36,000
The Manitoba Water Services Board	26,480
Special Operating Agencies Financing Authority — Fleet Vehicles Agency	12,000
Diagnostic Services Manitoba	10,606
Communities Economic Development Fund	10,000
Miscellaneous Corporations, Agencies and Other Programs	9,591
	1,406,641

BUDGET 2006   Financial Review and Statistics / B29

SECTION 2

g BORROWING REQUIREMENTS

Manitoba’s borrowing requirements in respect of both general and self-sustaining borrowings are estimated to total $2.8 billion in 2006/07, of which $2.2 billion is required for refinancing purposes. The remainder is required for capital investments including the Red River Floodway Expansion, and self-sustaining programs including those of Manitoba Hydro and the University of Manitoba. Incremental capital authority requirements totalling $194 million are provided by The Loan Act, 2006. The debt guarantee fee has been adjusted to 1.0% for Manitoba Hydro to reflect the value of provincial borrowing on its behalf.

Borrowing Requirements
(Thousands of Dollars)

			New Cash		Estimated		Borrowing
	Refunding		Requirements		Repayments		Requirements
	2006/07		2006/07		2006/07		2006/07
General Purpose Borrowings		1,482,212		—		—		1,482,212
Capital Investments General Assets		—		39,000		—		39,000
Capital Investments Infrastructure Assets		—		114,000		—		114,000
Manitoba Hydro		657,420		280,000		—		937,420
Health Facilities		40,000		96,000		49,636		86,364
University of Manitoba		—		75,000		2,000		73,000
Manitoba Lotteries Corporation		—		29,700		19,000		10,700
Manitoba Agricultural Services Corporation		—		75,000		70,000		5,000
Fleet Vehicles Agency		—		7,635		5,720		1,915
Manitoba Housing and Renewal Corporation		—		16,000		16,000		—
Manitoba Student Financial Assistance Program		—		15,000		15,000		—
Other Crown Organizations		—		34,665		22,280		12,385
		2,179,632		782,000		199,636		2,761,996

B30 / Financial Review and Statistics   BUDGET 2006

Statement of Provincial Borrowings, Guarantees and Obligations
(Thousands of Dollars) Unaudited

As at December 31, 2005 (with comparative fi gures for March 31, 2005)

	Canadian Dollar			Canadian Dollar			Increase (Decrease)
	Valuation (Note 1)			Valuation (Note 1)			December 31, 2005 over
	December 31, 2005			March 31, 2005			March 31, 2005
Provincial Borrowings Payable in:
Canadian Dollars		13,253,720			13,426,149			(172,429	)
Issues Hedged to Canadian Dollars		3,380,914			2,946,914			434,000
U.S. Dollars		2,218,766			2,056,320			162,446
Issues Hedged to U.S. Dollars		616,705			884,160			(267,455	)
Subtotal Provincial Borrowings		19,470,105			19,313,543			156,562
Guarantees and Obligations Payable in:
Canadian Dollars		1,227,088			1,396,010			(168,922	)
U.S. Dollars		0			0			0
Subtotal Guarantees and Obligations (Note 2)		1,227,088			1,396,010			(168,922	)
Subtotal Provincial Borrowings, Guarantees and Obligations (Note 3)		20,697,193			20,709,553			(12,360	)
Less: Sinking Fund Investments		(4,688,543	)		(4,561,149	)		(127,394	)
Less: Debt Retirement Fund		0			0			0
Total Provincial Borrowings, Guarantees and Obligations Outstanding (Note 4)		16,008,650			16,148,404			(139,754	)

NOTE TO READER: Outstanding provincial borrowings will fluctuate during the fiscal year as a result of the timing of borrowing activities of the province. While current accounting standards identify Net Debt as the best presentation of a government’s financial position, certain valuations used in the calculation of Net Debt are only payable at year end (see Manitoba Financial Statistics, Ten-Year Summary).

Note 1: The Canadian Dollar Valuation is calculated using the foreign currency exchange rates in effect at December 31, 2005 and at March 31, 2005. As at December 31, 2005, the U.S. dollar exchange rate was $1.1659 ($1.2096 at March 31, 2005).

Note 2: Includes borrowings of Manitoba Hydro which has been guaranteed by the Province, Government Enterprises and Other payables and third party debt of health care facilities.

Note 3: Provincial Borrowings and Guarantees are payable in Canadian and U.S. dollars. As at December 31, 2005, total provincial borrowings and guarantees were payable 86% in Canadian dollars and 14% in U.S. dollars. Of this total, general government program borrowings and other Crown organizations borrowings was 100% payable in Canadian dollars. Manitoba Hydro borrowings was payable 60% in Canadian dollars (59% at March 31, 2005) and 40% in U.S. dollars (41% at March 31, 2005).

Note 4: The above borrowings, guarantees and obligations were outstanding for the following purposes:

	December 31, 2005					March 31, 2005
	($ Thousands)			($ Per Capita) (Note 5)		($ Thousands)		($ Per Capita) (Note 5)
General Government Programs		6,598,923			5,601		6,594,139		5,605
Manitoba Hydro		6,540,036			5,551		6,615,015		5,623
Capital Investments		428,076			363		363,519		309
Health Facilities		661,761			562		738,761		628
Government Enterprises and Other (Note 6)		496,514			421		496,514		422
Other Crown Organizations		1,283,340			1,089		1,340,456		1,139
		16,008,650	(Note 7)		13,587		16,148,404		13,726

Note 5: Per Capita data is based on population figures at October 1, 2005 and April 1, 2005 as reported by Statistics Canada.

Note 6: In 2003/04, the province, in accordance with PSAB GAAP, changed its accounting treatment for certain amounts owed to Canada and for debentures issued by certain school boards and hospitals, the debt service of which is paid with future grants from the government. Amounts owed to the federal government over time, which were previously treated as accounts payable, are now accounted for as loans payable. Debentures issued by school boards and hospitals were previously recognized as an expense over the life of the debentures as grants for debt service were made and held by the Provincial Sinking Fund and MPI. Now the obligation to fund debt principal payments is expensed in full at the time the debenture is issued. Any of these debentures held by MPI are recorded as “Loans Payable to Government Enterprises.” The Government also recognized a loan payable in respect of the pension liability of the Manitoba Liquor Control Commission.

Note 7: Borrowings, guarantees and obligations decreased by $139.7 million. This decrease was primarily due to the impact of a stronger Canadian dollar together with a net increase in Manitoba Hydro’s sinking fund and other borrowings including matured hospital facilities borrowings which have not yet been refinanced, offset by the funding of Provincial Part B Capital, Infrastructure Capital and Manitoba Hydro’s capital requirements. Manitoba Hydro’s U.S. dollar revenues are sufficient to pay the interest and principal on all outstanding U.S. dollar borrowings.

BUDGET 2006   Financial Review and Statistics / B31

SECTION 2

Provincial Borrowings, Guarantees and Obligations
Net Maturities – December 31, 2005 to March 31, 2044

	Canadian Valuation Payable In
	Canadian		U.S.		Net
	Dollars		Dollars		Maturities
	(Millions of Dollars)
2005/06		524		—		524
2006/07		1,447		583		2,030
2007/08		1,692		—		1,692
2008/09		1,656		—		1,656
2009/10		488		183		671
2010/11		885		291		1,176
2011/12		410		—		410
2012/13		231		—		231
2014 - 18		3,069		395		3,464
2019 - 23		814		350		1,164
2024 - 28		661		—		661
2029 - 44		2,005		—		2,005
Treasury Bills and Promissory Notes		325		—		325
		14,207		1,802		16,009

The above table is based on foreign exchange rates at December 31, 2005.

B32 / Financial Review and Statistics   BUDGET 2006

Manitoba Financial Statistics, Ten-Year Summary

	2006/07			2005/06			2004/05			2003/04			2002/03
	Budget			Forecast			Actual			Actual			Actual
	(Millions of Dollars)
FINANCIAL STATEMENTS
Revenue
Own-Source Revenue (Notes 1 & 2)		5,651			5,503			5,303			4,874			4,874
Federal Transfers		3,000			2,862			2,919			2,515			2,230
Total		8,651			8,365			8,222			7,389			7,104
Expenditure
Program Expenditure (Note 1)		8,340			8,070			7,477			7,212			6,705
Public Debt Costs (Note 3)		282			269			241			311			321
Total		8,622			8,339			7,718			7,523			7,026
Net Revenue/(Expenditure)		29			26			504			(134	)		78
Emergency/Extraordinary Items (Note 4)											71
Debt/Pension Repayment		(110	)		(110	)		(99	)		(96	)		(96	)
Transfers from/(to) Fiscal Stabilization Fund		85			86			0			171			22
Balance under balanced budget legislation		3			3			405			13			4
Provincial Borrowings, Guarantees & Obligations
General Purpose		6,569			6,582			6,594			6,546			6,354
Manitoba Hydro		6,722			6,537			6,615			6,649			6,344
Other Crown Organizations		1,379			1,279			1,340			1,187			1,116
Health Facilities		908			792			739			615			640
Government Enterprises and Other		505			500			497			478			—
Capital Investments		608			455			363			321			295
Total		16,691			16,145			16,148			15,796			14,749
Summary Obligations
Pension Liability		4,152			3,955			3,761			3,571			3,411
Pension Assets Fund		(651	)		(526	)		(382	)		(267	)		(151	)
Net Pension Liability		3,501			3,429			3,379			3,304			3,260
Crown Organization Debt/ Consolidation Adjustment		170			170			171			262			101
Total		3,671			3,599			3,550			3,566			3,361
Total Summary Borrowings, Guarantees & Obligations		20,362			19,744			19,698			19,362			18,110
Adjustments to arrive at Summary Net Debt												��
Guarantees		(617	)		(491	)		(660	)		(923	)		(979	)
Net Financial Assets		(8,959	)		(8,615	)		(8,483	)		(7,422	)		(7,426	)
Summary Net Debt, as reported		10,786			10,638			10,555			11,018			9,705
Adjustments for Accounting Policy Changes — Quantifiable		0			0			(28	)		(29	)		539
Adjustments for Accounting Policy Changes — Estimated		0			0			125			125			97
Summary Net Debt, as restated		10,786			10,638			10,652			11,113			10,341
Fiscal Stabilization Fund, End of Year Balance		345			414			486			79			236
Summary Net Debt as restated, as percentage of GDP		24.5			25.3			26.6			29.4			28.2

Notes

1. Equal adjustments have been made to Own-Source Revenue and Program Expenditure to reflect the reconfiguration of Provincial Municipal Tax Sharing for years prior to 2005/06.

2. 2002/03 Revenue includes the $150 million Manitoba Hydro Special Payment arising from profits on export sales in 2001/02, and the $51 million adjustment for the federal accounting error in regard to capital gains tax refunds to mutual fund trusts.

BUDGET 2006   Financial Review and Statistics / B33

SECTION 3

2001/02			2000/01			1999/00			1998/99			1997/98
Actual			Actual			Actual			Actual			Actual
(Millions of Dollars)
															FINANCIAL STATEMENTS
															Revenue
	4,623			4,739			4,335			4,393			3,920		Own-Source Revenue (Notes 1 & 2)
	2,206			2,091			2,073			1,560			1,884		Federal Transfers
	6,829			6,830			6,408			5,953			5,804		Total
															Expenditure
	6,406			6,182			6,042			5,442			5,232		Program Expenditure (Note 1)
	414			511			465			515			520		Public Debt Costs (Note 3)
	6,820			6,693			6,507			5,957			5,752		Total
	9			137			(99	)		(4	)		52		Net Revenue/(Expenditure)
															Emergency/Extraordinary Items (Note 4)
	(96	)		(96	)		(75	)		(150	)		(75	)	Debt/Pension Repayment
	150			0			185			186			100		Transfers from/(to) Fiscal Stabilization Fund
	63			40			11			31			76		Budget under balanced budget legislation
															Provincial Borrowings, Guarantees & Obligations
	6,406			6,537			6,473			6,632			6,763		General Purpose
	6,263			6,053			5,798			5,677			5,569		Manitoba Hydro
	1,099			1,086			943			948			986		Other Crown Organizations
	615			579			501			450			461		Health Facilities
	—			—			—			—			—		Government Enterprises and Other
	245			260			245			142			0		Capital Investments
	14,628			14,515			13,960			13,849			13,779		Total
															Summary Obligations
	3,217			3,050			2,906			2,766			2,572		Pension Liability
	(107	)		(21	)										Pension Assets Fund
	3,110			3,029			2,906			2,766			2,572		Net Pension Liability
	98			113			(72	)		(228	)		(131	)	Crown Organization Debt/Consolidation Adjustment
	3,208			3,142			2,834			2,538			2,441		Total
	17,836			17,657			16,794			16,387			16,220		Total Summary Borrowings, Guarantees & Obligations
															Adjustments to arrive at Summary Net Debt
	(595	)		(416	)		(421	)		(776	)		(1,040	)	Guarantees
	(7,973	)		(8,460	)		(7,570	)		(7,108	)		(6,756	)	Net Financial Assets
	9,268			8,781			8,803			8,503			8,424		Summary Net Debt, as reported
	479			825			974			877			582		Adjustments for Accounting Policy Changes — Quantifiable
	255			282			269			546			713		Adjustments for Accounting Policy Changes — Estimated
	10,001			9,888			10,046			9,926			9,719		Summary Net Debt, as restated
	247			320			264			427			565		Fiscal Stabilization Fund, End of Year Balance
	28.5			29.0			31.4			32.1			32.7		Summary Net Debt as restated, as percentage of GDP

3.	Beginning in fiscal year 2002/03 the interest carrying costs of capital assets (then worth $20 million) are included in program expenditures. Beginning in fiscal year 2004/05 the interest carrying costs of infrastructure assets (additional $60 million) are also included in program expenditures.
4.	Under BBL, disaster-related expenditures may be written directly to accumulated deficit. In 2003/04, this is related to the BSE crisis, drought and forest fires.

B34 / Financial Review and Statistics   BUDGET 2006

Manitoba Financial Statistics, Ten-Year Summary

	2006/07			2005/06			2004/05			2003/04			2002/03
	Budget			Forecast			Actual			Actual			Actual
	(Percentage Change)
Annual Change
Own-Source Revenue		2.7			3.8			8.8			0.0			5.4
Federal Transfers		4.8			(2.0	)		16.1			12.8			1.1
Total Revenue		3.4			1.7			11.3			4.0			4.0
Program Expenditure		3.3			7.9			3.7			7.6			4.7
Public Debt Costs		4.8			11.6			(22.5	)		(3.1	)		(22.5	)
Total Expenditure		3.4			8.0			2.6			7.1			3.0
General Purpose Debt		(0.2	)		(0.2	)		0.7			3.0			(0.8	)
Net Pension Liability		2.1			1.5			2.3			1.3			4.8
Summary Net Debt as restated		1.4			(0.1	)		(4.2	)		7.5			3.4
Per Cent of GDP	(Per cent)
Own-Source Revenue		12.9			13.1			13.3			12.9			13.3
Total Revenue		19.7			19.9			20.6			19.6			19.4
Program Expenditure		19.0			19.2			18.7			19.1			18.3
Public Debt Costs		0.6			0.6			0.6			0.8			0.9
Total Expenditure		19.6			19.8			19.3			19.9			19.2
General Purpose Debt		14.9			15.7			16.5			17.3			17.3
Net Pension Liability		8.0			8.2			8.4			8.8			8.9
Summary Net Debt as restated		24.5			25.3			26.6			29.4			28.2
Per Cent of Revenue
Own-Source Revenue		65.3			65.8			64.5			66.0			68.6
Federal Transfers		34.7			34.2			35.5			34.0			31.4
Public Debt Costs		3.3			3.2			2.9			4.2			4.5
General Purpose Debt		75.9			78.7			80.2			88.6			89.4
Per Cent of Expenditure
Program Expenditure		96.7			96.8			96.9			95.9			95.4
Public Debt Costs		3.3			3.2			3.1			4.1			4.6
Dollars Per Capita	(Dollars)
Total Expenditure		7,286			7,081			6,595			6,476			6,080
Public Debt Costs		238			228			206			268			278
General Purpose Debt		5,551			5,589			5,635			5,635			5,498
Summary Net Debt as restated		9,114			9,034			9,102			9,567			8,949
Memorandum Items
Population (000’s)		1,183			1,178			1,170			1,162			1,156
GDP at Market Prices		43,975			42,029			40,006			37,746			36,625

Source: Manitoba Department of Finance

BUDGET 2006   Financial Review and Statistics / B35

SECTION 3

2001/02			2000/01			1999/00			1998/99			1997/98
Actual			Actual			Actual			Actual			Actual
(Percentage Change)															Annual Change
	(2.4	)		9.3			(1.3	)		12.1			(4.3	)	Own-Source Revenue
	5.5			0.9			32.9			(17.2	)		9.8		Federal Transfers
	(0.0	)		6.6			7.6			2.6			(0.2	)	Total Revenue
	3.6			2.3			11.0			4.0			6.4		Program Expenditure
	(19.0	)		9.9			(9.7	)		(1.0	)		(3.5	)	Public Debt Costs
	1.9			2.9			9.2			3.6			5.4		Total Expenditure
	(2.0	)		1.0			(2.4	)		(1.9	)		(0.7	)	General Purpose Debt
	2.7			4.2			5.1			7.5			17.9		Net Pension Liability
	1.1			(1.6	)		1.2			2.1			n.a.		Summary Net Debt as restated
(Per cent)															Per Cent of GDP
	13.2			13.9			13.6			14.2			13.2		Own-Source Revenue
	19.4			20.1			20.1			19.2			19.5		Total Revenue
	18.2			18.2			18.9			17.6			17.6		Program Expenditure
	1.2			1.5			1.5			1.7			1.8		Public Debt Costs
	19.4			19.7			20.4			19.3			19.4		Total Expenditure
	18.2			19.2			20.3			21.4			22.8		General Purpose Debt
	8.9			8.9			9.1			8.9			8.7		Net Pension Liability
	28.5			29.0			31.4			32.1			32.7		Summary Net Debt as restated
															Per Cent of Revenue
	67.7			69.4			67.6			73.8			67.5		Own-Source Revenue
	32.3			30.6			32.4			26.2			32.5		Federal Transfers
	6.1			7.5			7.3			8.7			9.0		Public Debt Costs
	93.8			95.7			101.0			111.4			116.5		General Purpose Debt
															Per Cent of Expenditure
	93.9			92.4			92.9			91.4			91.0		Program Expenditure
	6.1			7.6			7.1			8.6			9.0		Public Debt Costs
(Dollars)															Dollars Per Capita
	5,924			5,833			5,695			5,237			5,063		Total Expenditure
	360			445			407			453			458		Public Debt Costs
	5,564			5,697			5,666			5,830			5,953		General Purpose Debt
	8,687			8,618			8,793			8,726			8,555		Summary Net Debt as restated
															Memorandum Items
	1,151			1,147			1,143			1,138			1,136		Population (000’s)
	35,129			34,039			31,947			30,931			29,701		GDP at Market Prices

B36 / Financial Review and Statistics   BUDGET 2006

Restatement of Summary Net Debt: Adjustments for Accounting Policy Changes

In deriving Summary Net Debt, as restated, several measured and/or estimated prior period adjustments were made to reflect accounting policy changes as prescribed under PSAB. They are based on the following major assumptions.

1. It has been estimated that the province has incurred $125 million in environmental liabilities prior to 1998. It is assumed that this amount is applicable to 2004/05 and all prior years.

2. The consolidation information for those health care entities brought into the GRE in 2004/05 is not readily available prior to 2002/03. For prior years, the same level as was estimated in 2002/03, $145 million, is assumed.

3. The estimate of the inclusion of the carrying costs of infrastructure assets in 2004/05 was based on actual data back to March 2003. It is assumed that the carrying costs for prior years would be equal to that recorded in 2003/04, $15 million.

4. Health Sciences Centre transferred its operations to the Winnipeg Regional Health Authority in 2000/01. It is assumed that associated costs for 1997/98 and 1998/99 would be $195 million, the same as in 1999/2000.

5. The cost of future employee benefits for Regional Health Authorities (RHAs) and other Crown organizations is not readily available for 1997/98 and 1998/99. The cost for these years is assumed to be equal to that incurred in 1999/2000, $81 million.

6. The cost of the consolidation of the RHAs and the combination of other health care entities is not readily available for 1997/98, and has been assumed to be equal to the $75 million recorded in 1998/99.

BUDGET 2006   Financial Review and Statistics / B37

Section 3

Glossary of Terms

Borrowings: Borrowings are securities issued in the name of the province to capital markets investors. Securities include debentures, treasury bills, promissory notes, medium-term notes and Manitoba Savings Bonds.

Federal Recoveries and Transfers: Federal recoveries represent revenue related to capital expenses incurred by the provincial government that are recovered, or receivable, from the federal government. Federal transfers are comprised of the total operating revenue entitlements that are either received or receivable from the federal government.

Government Reporting Entity: To be considered a part of the Government reporting entity, an organization must be accountable for the administration of its financial affairs and resources to a minister of the government, or directly by the Legislature, and/or must be controlled by the government as prescribed by PSAB.

Gross Domestic Product (GDP): Represents the total market value of all final goods and services produced in the Manitoba economy. The GDP is obtained from the most recent reports published by Statistics Canada.

Guarantees: The province, in the normal course of business, will provide a guarantee to honour the repayment of debt or loans of an organization, primarily government enterprises and Crown organizations within the GRE. Such a guarantee is provided on the Manitoba Hydro Savings Bonds. While these guarantees represent a potential obligation of the province, they are only reflected as a liability in the financial statements to the extent there is an indication that the province will have to honour the guarantee.

Net Financial Assets: Assets of the government (such as cash, investments, loans and accounts receivable) less accounts payable, that can be easily converted to cash in order to pay government’s liabilities or finance its future operations.

Non-Financial Assets: Includes all items of a permanent nature, such as tangible capital assets and consumable goods such as inventories that do not normally provide resources to discharge existing liabilities.

Obligations: Long-term, non-interest-bearing liabilities of the province, which may or may not carry specific repayment terms.

Own-Source Revenue: Includes provincial revenue either received or receivable from all sources and excludes federal transfers and recoveries.

B38 / Financial Review and Statistics   BUDGET 2006

Pension Assets Fund: Financial assets that are set aside to provide for the orderly retirement of the government’s pension obligations as required under the amended provisions of The Balanced Budget, Debt Repayment and Taxpayer Accountability Act.

Pension Liability: The unfunded portion of the outstanding actuarial-calculated pension liability of the government and participating Crown organizations. The government of Manitoba supports eight separate pension plans.

Program Expenditure: Current program expenditure includes the cost of all core government programs, but excludes debt servicing costs.

Public Debt Costs: Debt servicing costs on all government borrowings and obligations, net of interest recoveries from departments, government enterprises and Crown organizations, and interest earned on investments including sinking funds.

Sinking Funds: Sinking funds are funds that are set aside to provide for the orderly retirement of borrowings as they come due. Contributions made can be either required by legislation or at the discretion of the Minister of Finance.

Summary Net Debt: Represents the total liabilities of the GRE less its financial assets. This is the residual liability amount that will have to be paid or financed by future revenue.

BUDGET 2006   Financial Review and Statistics / B39

SECTION 3

Classifications of Provincial Borrowings:

• General Purpose: Borrowings issued to support provincial accumulated deficits (government program debt), including any provincial securities that are not self-sustaining, or that are not associated with the acquisition of capital assets.

• Manitoba Hydro: The province borrows and provides guarantees on behalf of Manitoba Hydro. This debt is secured by loans receivable from Manitoba Hydro, which is responsible for all principal repayments and debt servicing costs associated with these borrowings and guarantees.

• Other Crown Organizations: Borrowings issued to support the business activities of Crown organizations excluding Manitoba Hydro. These entities are responsible for all principal repayments and debt servicing costs associated with these borrowings.

• Health Facilities: Borrowings on behalf of or in the name of health care facilities to support the construction or upgrade of all health care facilities operating within the province. These borrowings have a repayment schedule equivalent to their useful economic life. This debt is secured by receivables from the health care facilities.

• Government Enterprises and Other: Represents long-term payables to the federal government, Manitoba Public Insurance and the Manitoba Liquor Control Commission which, for accounting purposes, have been classified as long-term obligations.

• Capital Investments: Borrowings issued to support the acquisition or construction of fixed assets of the government which, for accounting purposes, are expensed over their useful economic life.

B40 / Financial Review and Statistics   BUDGET 2006

Manitoba Summary Budget Statistics

	2006/07			2005/06			2004/05
	Budget			Forecast			Actual
	(Millions of Dollars)
FINANCIAL STATEMENTS
Operating Fund
Revenue
Own-Source Revenue		5,651			5,504			5,303
Federal Transfers		3,000			2,862			2,919
Total		8,651			8,365			8,222
Expenditure
Program Expenditure		8,340			8,070			7,477
Public Debt Costs		282			269			241
Total		8,622			8,339			7,718
Net Revenue on Operations		29			26			504
Debt/Pension Repayment		(110	)		(110	)		(99	)
Transfers from/(to) Fiscal Stabilization Fund		85			86			0
Balance under balanced budget legislation		3			3			405
Summary Information
Adjustments on Consolidation
Income (loss) from Crown Organizations
Manitoba Hydro		222			375			136
Manitoba Public Insurance		10			46			79
Manitoba Agricultural Services		(3	)		(145	)		(85	)
Incremental Income from other Crown Organizations		36			72			115
Subtotal: Income from Crown Organizations		265			348			245
Additional Changes in Special Funds		(48	)		(49	)		24
Increase in Net Pension Liability		(72	)		(51	)		(75	)
Summary Financial Statement Balance		148			251			599
Net Impact of Accounting Restatements		0			0			3
Summary Balance as Restated		148			251			602
Fiscal Stabilization Fund, Year End Balance		345			414			486
Consolidated Debt Servicing Charges		727			751			767

BUDGET 2006   Financial Review and Statistics / B41

SECTION 3

Manitoba Summary Budget Statistics

	2006/07			2005/06			2004/05
	Budget			Forecast			Actual
Annual Change	(Per cent change)
Own-Source Revenue		2.7			3.8			8.8
Federal Transfers		4.8			(2.0	)		16.1
Total Operating Fund Revenue		3.4			1.7			11.3
Program Expenditure		3.3			7.9			3.7
Public Debt Costs		4.8			11.6			(22.5	)
Total Operating Fund Expenditure		3.4			8.0			2.6
Consolidated Debt Servicing Charges		(3.2	)		(2.1	)		(4.0	)
Income from Crown Organizations		(23.7	)		42.1			n.a.
Per cent of GDP	(Per cent change)
Own-Source Revenue		12.9			13.1			13.3
Total Operating Fund Revenue		19.7			19.9			20.6
Program Expenditure		19.0			19.2			18.7
Public Debt Costs		0.6			0.6			0.6
Total Operating Fund Expenditure		19.6			19.8			19.3
Per cent of Revenue
Own-Source Revenue		65.3			65.8			64.5
Federal Transfers		34.7			34.2			35.5
Public Debt Costs		3.3			3.2			2.9
Dollars Per Capita	(Dollars)
Total Operating Fund Revenue		7,310			7,103			7,026
Total Operating Fund Expenditure		7,286			7,081			6,595
Public Debt Costs		238			228			206
Balanced Budget Legislation Result		3			3			346
Summary Balance as Restated		125			213			515
Income from Crown Organizations		224			296			209
Consolidated Debt Servicing Charges		614			638			655
Memorandum Items
Population (000’s)		1,183			1,178			1,170
GDP at Market Prices		43,975			42,029			40,006

B42 / Financial Review and Statistics   BUDGET 2006

g MANITOBA’S RELATIVE POSITION AMONG PROVINCES

Manitoba continues to maintain its reputation for fiscal responsibility. The province’s measured approach to balancing the budget, paying down debt and pension liability, and dealing with the needs in health care and other program areas has been acknowledged by financial analysts and credit rating agencies. This performance has been reflected in the credit rating upgrades Manitoba has received from Moody’s Investors Service and Dominion Bond Rating Service (DBRS) over the past five years.

Manitoba has one of the most efficient and cost-effective governments in Canada. Continuous improvements in the way government operates and delivers services helps keep Manitoba programs affordable and effective (See Modernizing Government, Budget Paper G). As the adjoining charts indicate, per capita total expenditure in Manitoba was second lowest among provinces in 2005/06, while per capita program expenditure was fourth lowest.

Since 1999, Manitoba has made an effort to reduce its debt. In 1999/2000, the debt payment made by the province was $75 million. In 2000/01, the payment was boosted to $96 million and last year was increased again to $110 million. Since 1999, Manitoba has committed more than $704 million to debt retirement and to reducing the province’s unfunded pension liability.

Comparing debt levels among provinces is difficult because provinces report debt differently. An independent measure of provincial tax supported debt is provided by DBRS. DBRS attempts to measure debt on a standardized basis, with debt defined broadly as tax-supported debt plus unfunded pension liabilities, less sinking funds and internal holdings. For 2005/06, Manitoba’s debt to GDP ratio was estimated by DBRS at 32.9%, down from 37.3% five years ago, and near the average among provinces.

The success of Manitoba’s fiscal performance has provided the province with the ability to maintain its commitments to health care and other social programs. In fact, in 2005/06, Manitoba’s per capita health expenditures were third highest among provinces.

Provincial Debt Ratings
March 2006

Province	Moody’s		Standard & Poors’			DBRS
Alberta	Aaa		AAA			AAA
British Columbia	Aa1		AA			AA
Ontario	Aa2		AA			AA
Manitoba	Aa2		AA-			A(high)
Saskatchewan	Aa2		AA-			A(high)
New Brunswick	Aa3		AA-			A(high)
Quebec		A1		A+		A
Prince Edward Island		A2		A		A(low)
Nova Scotia		A2		A		A(low)
Newfoundland and Labrador		A3		A	-	BBB(high)

BUDGET 2006   Financial Review and Statistics / B43

SECTION 3

B44 / Financial Review and Statistics   BUDGET 2006

g IMPROVING TRANSPARENCY AND ACCOUNTABILITY

The Government of Manitoba prepares its Summary Financial Statements in accordance with GAAP as outlined by PSAB of the CICA. This process includes an ongoing evaluation of emerging PSAB standards for implementation so as to continually improve accountability and transparency to Manitobans.

The government’s March 31, 2005 Summary Financial Statements were prepared in full compliance with GAAP for the first time and received an unqualified audit opinion from the Office of the Auditor General (OAG).

It should be noted that the OAG indicated in its January 4, 2006 press release that, due to new 2005/06 GAAP standards, the government will be receiving a qualified audit opinion for the next two years. As part of the new standards, more entities are required to be included as part of the GRE in the summary financial statements. These qualifications will arise because all of the consolidation information is not yet available for Manitoba’s public schools. All other entities identified as part of the GRE will be included in the 2005/06 Public Accounts. The Auditor General acknowledged that “the Province is undertaking significant steps to eliminate this upcoming qualification for the year ending March 31, 2008.”

g IMPROVED REPORTING

Overall, the government has benefited from the recommendations of the Auditor General in regard to financial reporting. In the first set of Public Accounts issued by this Administration in 1999/2000, we implemented his recommendation to combine the summary financial statements into one volume so that their inter-relationships would be more transparent to the reader. Acting on further recommendations, the government began issuing comprehensive annual reports in 2000/01, which included not only financial statements, but also management discussion and analysis. Further, the reports now include financial and economic indicators related to the government’s central operations, as well as for entities within the entire GRE, including government enterprises and Crown organizations.

The government has committed itself to improved reporting in its plan to move to summary budgeting and reporting by 2007/08. As part of this initiative, it is also the government’s intention to issue quarterly operating results for the entire GRE as soon as practical after 2007/08 so as to provide Manitobans with progress reports throughout the year. As well, for the first time, Budget Paper B now contains a Glossary of Terms to assist the reader in understanding the major accounting and financial terms used.

BUDGET 2006   Financial Review and Statistics / B45

SECTION 4

Over the past several years, we have reached several milestones in improved financial reporting. These include:

• Recognition of the unfunded liability for future benefits for employees of non-devolved health care facilities

• Improved notes and schedules to the financial statements

• In 2005/06, we will be recording the environmental liabilities for any contaminated sites for which the government is obligated, or likely to become obligated, to incur related remediation costs, when these liabilities can be reasonably estimated. This improvement is as a result of the adoption of new accounting standards for the recognition of liabilities in a government’s financial statements

• Revised treatment of capital funding to schools and hospitals

• Recognition of third party capital debt held by health care facilities as provincial debt

• Inclusion of all controlled health care entities into the summary financial statements on a fully consolidated basis

• Revised treatment of the Manitoba Liquor Control Commission’s net profits in accordance with GAAP

• Quantification of GAAP exceptions in the Operating Fund and Special Purpose Financial Statements, and

• Elimination of GAAP exceptions on the March 31, 2005 Summary Financial Statements.

g CAPITAL ACQUISITIONS AND INFRASTRUCTURE CAPITALIZATION

The government is now in full compliance with the capital asset accounting practices prescribed by PSAB. This has resulted in greater departmental accountability for capital expenditures. As a result, each year since 1999/2000, the budget for acquisition costs of general assets have been reflected in Part B of the Estimates and the related annual amortization costs have been voted as part of the Part A departmental appropriations. To further improve our capitalization policies, in 2004/05, Manitoba introduced a capitalization policy for its infrastructure assets as well.

g PENSION ACCOUNTING

As part of our continued progress towards ensuring we meet and account for our pension obligations, departments began funding from their appropriations, the cost of the employer pension contributions for employees hired on or after October 1, 2002. This funding is being directed to the Pension Assets Fund along with other contributions made from the DRF. The cost of the pension benefits has thus begun to be appropriately reflected in the various programs across government. This measure also accelerates the government’s plan to address the outstanding pension liability.