Higher-than-anticipated spending on child protection, forest fire suppression and public safety is driving the province's finances deeper into the hole.
The Selinger government now expects the 2012-2013 deficit to reach $567 million -- an increase of $107 million over the $460 million projected in April.
The gloomier deficit forecast comes despite the fact government revenues -- particularly in the areas of corporate and income taxes -- are coming in higher than expected.
The latest projections were contained in the Finance Department's quarterly financial report, released on Thursday. It reported on revenues and expenditures from the start of the government fiscal year April 1 to the end of September.
The new, higher deficit projection did not come as a surprise after the government announced last week it would delay balancing its books until 2016-17. Before that, it had promised to start running budget surpluses in 2014-15.
The $567-million summary deficit, which also takes into account the financial performance of Crown corporations, will still be an improvement over last year's performance. In 2011-12, the Selinger government posted a record $999-million deficit, largely due to the 2011 flood.
Progressive Conservative Leader Brian Pallister said the quarterly report shows the government's fiscal woes are driven by chronic overspending, not a lack of revenue.
He said he is concerned by the fact the NDP government is on pace to exceed budgeted spending for a 13th consecutive year.
"Let's understand, this is happening at a time when interest rates have not yet risen. Yet no one is predicting they will drop. So what happens to government expenditures when interest rates rise?" said Pallister.
If the government doesn't curb its spending, Manitobans could be in for more tax increases and future generations will be left carrying a heavy debt burden, Pallister said.
Finance Minister Stan Struthers, however, defended the province's fiscal performance. He said 15 of 18 government departments are projected to come in at or under budget.
Meanwhile, the government has identified $115 million in spending reductions and is set to recoup an additional $75 million on the sale of its property registry.
The province has repeatedly pledged not to sacrifice basic services to Manitobans while the country recovers from the economic downturn.
"I would wonder what services Mr. Pallister is suggesting we should cut," Struthers said in response to the Tory leader's criticisms.
Pallister said he would begin by conducting a thorough review of all government expenditures, something, he said, the NDP has failed to do.
Meanwhile, in its quarterly report, the Finance Department forecast the province's real gross domestic product will increase by 2.3 per cent this year and 2.2 per cent in 2013.
That's above the national average of 2.0 per cent for both years, but below its forecasts at the time of last spring's budget.
Keys to the ballooning deficit
Family Services and Labour Department spending is expected to be $46.9 million over budget.
Police and corrections spending is projected to be $35 million over budget.
Forest firefighting costs were $10 million higher than expected.
Entrepreneurship, Training and Trade Department spending is projected to be $5 million over budget.
-- source: Manitoba Finance