WINNIPEG — The Manitoba government, reeling from the fallout of the mad cow crisis, drought and forest fires, raised taxes, fees and drug premiums Monday in a bid to prop up its 2004-05 budget.

The province will also eliminate 400 civil servant jobs through attrition. Finance Minister Greg Selinger said the tough measures are needed to keep the budget balanced under provincial legislation.

"This past year will be remembered as one of great challenges," Selinger told the legislature.

"As promised, the province has invested in the priorities of public health care, education and supports for children and families."

The province's drug plan will be reorganized, with premiums increasing by five per cent or more depending on income.

Tobacco taxes will increase two cents per cigarette. Liquor taxes will also increase to generate $10 million in revenue.

The NDP government will also broaden the seven per cent provincial sales tax to include services such as accounting and security.

Selinger said the government is projecting a $3-million surplus on a $7.5-billion budget. However, the province excludes some capital spending, some pension requirements for government employees and losses at Crown corporations in order to show a balanced budget.

For the first time since 1996, the province does not plan to make a withdrawal from its $106-million rainy-day fund. The government already dipped into the fund during the last fiscal year to get emergency money to help cope with mad cow and forest fires.

But overall, the province's total debt will rise $800 million to $19.3 billion. That figure includes a $96-million debt repayment.

All provincial departments will reduce discretionary spending by as much as seven per cent.

However, health-care funding will increase by 5.2 per cent, with the extra money going towards recruiting and retaining nurses, reducing waiting lists and improving emergency room services.

Selinger said the changes to the provincial pharmacare program will not bring in extra money for the government, but will generate about $10 million to offset rapidly rising drug costs.

Selinger called the budget "a blueprint for fiscal stability" because it deals head-on with challenges such as slower than projected economic growth and a reduction of $104 million in federal health-care funding.

"Now more than ever it is important for us to stick to the long-term plan that . . . focuses on affordability and sound fiscal management," Selinger told a news conference before tabling the budget.

There were no new tax goodies announced Monday.

A $39-million personal income tax break for middle-income earners took effect last January. The corporate tax rate will fall to 14.5 per cent.

Highlights of the 2004-05 Manitoba budget:

• The government projects a $3-million surplus, but the overall provincial debt will rise by $800 million to $19.3 billion.
• 400 civil servant jobs will be eliminated through attrition.
• Provincial drug plan premiums will increase by at least five per cent and new income brackets will be introduced to limit benefits.
• All departments will reduce discretionary spending by up to seven per cent.
• Vehicle registration fees will increase by $23 effective July 1.
• Health-care funding will increase by 5.2 per cent to recruit nurses, reduce waiting lists and improve emergency room services.
• Tobacco taxes will increase two cents per cigarette effective at midnight Monday night.
• Liquor prices will increase to generate another $10 million.
• Funding for colleges and universities will increase by 3.5 per cent.
• Diesel fuel taxes will increase 0.6 cents per litre to 11.5 cents effective midnight April 30.
• The seven per cent provincial sales tax will be broadened to include legal, accounting, engineering, architectural and security services.