ONTARIO’S APRIL SURPRISE

Auditor General says Liberals understated deficit by billions

TORONTO • Ontario’s Liberal government was already in dire straits, badly trailing the Progressive Conservatives in poll after poll.

But the party’s prospects in the run-up to the June provincial election took a positively bleak turn Wednesday as the province’s auditor general released a bombshell report suggesting the Liberals had “dramatically” understated their projected deficits by billions of dollars a year.

Questionable, opaque accounting has hidden the true state of the province’s books, while the financial watchdog herself was kept “out of the loop,” said an unusually blunt Bonnie Lysyk.

“They took a risk and fortunately, I would say, for all the legislators and for the citizens, my staff is pretty strong and we figured out what was going on,” said the soft-spoken auditor general. “And it’s not right.”

The government had already promised an array of new spending programs that would on their own generate large deficits for the next six years.

The Liberals dismissed Lysyk’s criticisms Wednesday as the product of an ongoing accounting disagreement.

But opposition parties were giddy at the watchdog’s April surprise, coming just six weeks before the election, and underlining a central issue in the campaign: Liberal financial stewardship and transparency.

“Today I think is a stunning indictment,” said Lisa MacLeod, the Progressive Conservative treasury board critic. “They are reckless, they can’t be trusted.”

The Tories and New Democrats may grow more sombre, though, as they consider the ramifications for their own platforms. Suddenly, those promises will have to contend with a flood of unexpected red ink and, in at least one case, a challenge to their own accounting assumptions. Tory MPPs declined to commit Wednesday to bringing in a balanced budget if they’re elected June 7, as Leader Doug Ford has sometimes hinted at.

Nor could they say if the auditor’s numbers would mean deeper spending cuts than the four per cent — about $6 billion — Ford has already promised. If elected, the Conservatives are having an independent audit done to get to the bottom of the situation, said Vic Fedeli, the PC finance critic.

The NDP also blasted the government, but its detailed platform adopts some of the Liberals’ accounting methods, including one condemned in Lysyk’s report.

The Liberal budget last month promised programs from expanded prescriptiondrug coverage to free daycare for some children. The result would be deficits of about $6.7 billion for the next three years and smaller ones for the three years after that – following a claimed surplus this year.

But Lysyk said the holes would actually be much deeper. She pegged the 201819 deficit at almost $12 billion, rising to $12.5 billion in 2020-21, almost double what the government projects.

The auditor general cited in part how the Liberals accounted for a controversial plan introduced last year to reduce electricity rates by 25 per cent.

The rate cut is being funded by loans through government-owned Ontario Power Generation, but the cost of that borrowing in nowhere to be found on the provincial books, Lysyk said, repeating a criticism she has repeatedly raised before.

The government has also wrongly recorded revenue from the Ontario Teachers’ Pension Plan, and insufficiently accounted for contributions to the Public Service Employees’ Union Pension Plan, she said.

The government, though, says its own outside accounting consultants assure them they are handling the books properly.

“It’s fully transparent,” said Finance Minister Charles Sousa. “The debt is reflected. The amount of transactions is apparent. It’s there for all to see.”

Lysyk said those “wellpaid” external accounting firms helped the government craft the contentious plans in a legal way, but have not examined or endorsed the overall provincial ledger.

“The government knew we would have an issue with this accounting,” the auditor added. “And there was intent to keep us out of the picture.”

If Lysyk is right, any party that replaces the Liberals would face a budget at least $5 billion in the red, even without any of the government’s — or other parties’ — new plans.

The Conservatives have yet to release a full platform, but Ford has made some fairly expensive commitments, offsetting the promised four-percent spending reduction.

Among them are almost $2 billion in tax cuts, the end of a cap-and-trade system expected to raise $2 billion and 15,000 new nursing home beds, yet to be priced.

The NDP says it would end the hydro rate-cut plan, curtailing any more borrowing, but it currently takes the same approach to the pension plans as the Liberals. The New Democrats’ own platform, including several new spending programs, would produce deficits of up to $5 billion over the next half-decade, they say.