STUDENTS WIN IN BUDGET

The good news in this year’s Ontario budget is that the budget will soon be back in balance. The bad news is that this does not actually mean anything. In its continuing efforts to wish the budget deficit away, the Wynne government has succeeded in making such terms as “budget” and “deficit” more or less incomprehensible.

But let us pretend for a minute that we should attach some credibility to the government’s numbers, or that there is some real-world significance to the projection that the deficit will decline from $ 5.7 billion last year to $4.3 billion this year and zero the next. How is this to be achieved?

The government would have you believe it is a result of rigorous control of spending. Yet spending for the coming fiscal year, at $ 122 billion, is $ 6 billion higher than projected two years ago; for next year, it is $ 4 billion higher than projected last year. At roughly $ 8,500 per capita, spending is not only one- third higher than under the Mike Harris Conservatives — after inflation, after population growth — it is 30 per cent higher than under Bob Rae and t he NDP. Even as a proportion of GDP, a much more forgiving standard, it is higher than in all but three years of the province’s history, prior to the coming of the Liberals.

So no, spending is not under control. Such progress as is being made against the deficit — again, we are still pretending this has some meaning, of a kind that might be understood by, say, humans — is all on the revenue side: up 6.8 per cent in the last fiscal year, and projected to grow another nine per cent over the next two. Perhaps this is the fruit of rapid economic growth? Not so much: notwithstanding the combined stimulus of $30 oil, a 72 cent dollar, a growing U. S. economy and near- zero i nterest rates, growth is projected to slide from 2.5 per cent last year to two per cent in 2019.

That revenues are nonetheless projected to soar represents one part wishful thinking, one part federal transfers — Ontario now depends on Ottawa for nearly $ 25 billion annually, twice what it received a decade ago — and one part dodgy accounting. In the current fiscal year, for example, the government will book $ 1.1 billion from its “Asset Optimization Strategy,” otherwise known as the partial sale of Hydro One: a one- time gain that does nothing for the government’s fiscal position in the longer term ( though it hopes to eke out another $ 4.6 billion in asset sales in coming years).

For the next fiscal year, it plans on collecting $500 million from the sale of carbon permits under its new cap and trade plan, rising to $1.9 billion the following year.

Much effort was expended on budget day debating whether these revenues have been strictly quarantined, as the government pretends — the proceeds from asset sales are supposedly reserved for spending on infrastructure, the carbon permits for spending on green technologies — or whether they might leak out into general revenues, as the opposition warned. But in fact this distinction is meaningless. Money is money: if the government were not spending the carbon money on green technology, it would have to finance it from some other part of its budget. Or, indeed, its off-budget.

And this gets us to the crux of the matter. Because even as the deficit, as the government defines it, is sliding towards zero, the province’s net debt is set to carry on growing at a tremendous clip: $ 12 billion this year, $ 8.5 billion next, $ 7.4 billion the year after that, another $10 billion the following. More and more of the government’s debt is now off- budget: where the province’s accumulated deficit, which used to be synonymous with its debt, is now at 26 per cent of GDP — alarming enough on its own — its net debt is half again as large.

MORE AND MORE GOVERNMENT DEBT IS NOW OFF-BUDGET.

There’s a case to be made for putting operating and capital expenses on separate accounts, on the grounds that borrowing for capital projects that pay continuing returns in the long run has different implications than borrowing for current consumption. There’s also a case to be made against it. The point is, that’s not what this government is doing. It is very difficult to tell now what is on- budget and what is off, or why, and to the extent that the government troubles itself to tell us which is which, it cannot be guaranteed to stick to the same definition from year to year.

What can be said is that its net debt is the largest, relative to GDP, of any jurisdiction in North America, save for Quebec; that the cost of servicing that debt, even at today’s record low interest rates, is now the third- largest single item in the budget, after health and education; and that the government’s fiscal plan, in the face of the risks to which the province is thus exposed — an economic downturn, a spike in interest rates, a slump in the Toronto housing market — is to whistle softly and hope for the best.