Ontario’s budget a house of cards

In his recent budget speech, Ontario Finance Minister Charles Sousa said the Wynne government will balance its books not only this year, but “next year and the year after.”

“The people of Ontario can count on it,” he asserted.

On Wednesday, Stephen LeClair, Ontario’s independent Financial Accountability Officer, disagreed.

The budget watchdog projected that beginning in 2018-2019, there will be, “a steady deterioration in the budget deficit due to more moderate revenue growth and higher expenses.”

Premier Kathleen Wynne’s government is currently in a dispute with Auditor General Bonnie Lysyk, another independent officer of the Legislature, about how it reports surpluses in two public service pension plans.

Using the government’s accounting, LeClair said, it will likely achieve a balanced budget this fiscal year (2017-2018) due in part to $3 billion in one-time revenues achieved through asset sales. (See Hydro One).

However, beyond this fiscal year, LeClair expects “the deficit to deteriorate steadily.

Using the auditor general’s more stringent accounting standards, the situation is even worse.

LeClair projects, “significant budget deficits over the next five years, reaching $6.5 billion by 2021-22”, increasing Ontario’s net debt by $76 billion to more than $390 billion.

On this basis, LeClair said, Ontario’s net debt-to-GDP ratio will climb to over 40% by 2020-21, well above the Wynne government’s interim target of 35% by 2023-24.

LeClair says the only way the Wynne government will be able to fulfill its promise of balanced budgets going forward — even with Ontario’s relatively strong economy — is through “significant fiscal policy adjustments”.

That means raising revenues (new taxes) or reducing expenditures (cutting services).

LeClair’s report is further evidence all Wynne is really trying to do is convince voters Ontario’s finances are stable leading up to the next election. Under Ontario law, that vote must be held by June, 2018.

The underlying problem is the Liberal government’s entire fiscal plan is a house of cards beyond this year, which will present enormous challengers for the taxpayers of Ontario no matter who wins the next election.

The question is, can we trust the same political party that got us into this mess — the Liberals — to get us out of it?

We believe the answer is obvious.