This column originally ran in the Winnipeg Free Press on July 15, 2015

Manitobans are already spending $650 each to cover the annual interest payments on the provincial debt. That money doesn’t pay for roads or schools. It doesn’t even pay down the actual provincial debt. Those are just the interest payments.

And Manitoba’s interest payments are about to go up.

The bond rating agency Moody’s downgraded Manitoba’s credit rating on July 10. Credit ratings from bond rating agencies are similar to personal credit scores. When a family misses car payments their credit score is likely to suffer and they will face higher interest payments when they refinance their mortgage. The same is true for governments.

The Manitoba government hasn’t made payments to reduce debt for years. In fact, it’s been borrowing in a big way. This year’s deficit will add $422 million in debt. The province’s overall debt is $33 billion. This year’s interest payments will total $842 million.

Those numbers are beyond comprehension for those of us who count the change after paying for a Happy Meal, but the per capita numbers bring the reality down like a brick to the head.

Picture a family of four. Their share of the provincial debt is more than $100,000. That family is paying $2,600 annually to cover the interest on the debt.

A credit downgrade means that family will owe more and pay more in the future.

The Manitoba government says it will balance the budget in a few years. It’s said that before. We didn’t believe the government then and we don’t believe it now. This time nobody, not even Moody’s, believes this government’s projections..

Moody’s says Manitoba will face “significant challenges in achieving fiscal balance.” That’s politely understated.

Here’s the reality: Manitoba’s going in the wrong direction. Last year the government projected a deficit of $357 million, but actually ran up a deficit of $424 million. This year Manitoba is projecting a deficit of $422 million and past performance would suggest that number will be worse in reality. Manitoba’s projections count on $70 million per year from “in-year adjustment/lapse.” This means the government is planning to find $70 million through a combination of unexpectedly higher revenues and/or lower expenses. A plan that depends on the unexpected is not a realistic plan.

Taxpayers should brace for a tax hike. The government will need more money to cover increasing borrowing costs. Greg Selinger’s government has done it before when it raised the PST without even holding a legislatively required referendum. The last tax hike didn’t solve the problem, but there’s nothing to suggest that Premier Selinger has learned his lesson.

Higher taxes shouldn’t be Manitobans’ only worry. Moody’s specifically notes that it’s not downgrading Manitoba Hydro’s credit rating. That’s despite the fact that Hydro’s soaring debt is backed by the province. Moody’s clearly expects Hydro to have the money to make loan payments. Right now Hydro is asking for a 3.95 per cent rate increase. It says it needs 3.95 per cent rate increases every year until 2024. At that point, rates will be up 42 per cent. Moody’s seems to expect Hydro to get those rate increases and Manitobans should brace for higher bills.

Moody’s analysis is not without hope, however.

“The rating could be upgraded if Manitoba demonstrates fiscal strength evidenced by an earlier than expected return to balanced budgets and clear signals that it could begin to reduce its debt burden on a sustainable basis,” states Moody’s.

Manitoba has a choice. Manitoba can chose to make some tough choices now, trim government spending, and get back to balance and debt reduction without raising taxes. Or Manitoba can continue on its current course. But rising debt payments and interest costs will force us to make those cuts and raise taxes anyway. Let’s make the choice before it’s made for us.