Wynne spends it, as usual

The Wynne government recently tabled Ontario’s first balanced operating budget in a decade. While it’s good to see the province finally bringing its annual operating expenditures in line with revenues, there are worrying signs the government plans to go right back to the same undisciplined approach to spending that created Ontario’s deficit and debt problems in the first place.

A popular narrative from Queen’s Park is that factors beyond the government’s control (such as the global recession of 2009) are to blame for the mountainous run-up in debt in recent years.

But this narrative is, at best, an oversimplification. In reality, undisciplined spending also significantly contributed to Ontario’s fiscal problems. Between 200304 and 2015-16, program spending in Ontario (which excludes interest payments on government debt) increased at an average annual rate of 4.7 per cent. This rate of spending growth greatly exceeds the annual average growth rate of the provincial economy (3.2 per cent) as well as other relevant metrics.

But had the government increased spending since 2003-04 at the same rate as growth in the provincial economy, Ontario would have run just one budget deficit (instead of 11). Under this scenario, the rapid run-up in provincial debt (a doubling, in fact) simply would not have occurred.

To its credit, the government did slow the rate of spending growth in recent years, holding program modest spending restraint allowed the government to finally balance the operating budget this coming year.

But make no mistake, serious fiscal challenges remain.

For starters, the factors that helped drive recent revenue gains likely won’t last forever. For example, after more than a decade of strong growth, federal transfers to the province are expected to fall or remain flat in the years ahead. And if Toronto’s