Fedeli blames ‘reckless’ Liberals for $15B provincial deficit

Minister warns of ‘sacrifices’ while NDP says new accounting is just a pretext for deep cuts

Ontario must tackle a “sobering” $15-billion deficit this year, Finance Minister Vic Fedeli said Friday as the official Opposition branded the number “political theatre” paving the way for deep cuts to services.

Fedeli warned citizens to gird for “sacrifices” as Premier Doug Ford’s Progressive Conservatives try to balance a budget left in a shambles by a “reckless” Liberal government defeated in the June 7 election.

“The task ahead is not an easy one,” the former mayor of North Bay told a breakfast meeting of the Economic Club of Canada at a downtown Toronto hotel.

While the previous Kathleen Wynne administration pledged to run a deficit of $6.7 billion this year, the new number is more than twice that.

This is mainly because of the accounting Fedeli said was improperly used to include teacher and civil service pension plan surpluses — over which the province has no claim — as assets.

Auditor general Bonnie Lysyk had refused to sign off on the province’s fi- nancial statements for two years because of this, saying the Liberal government needed to abide by new public sector accounting standards.

Lysyk credited the Ford administration with agreeing to the change and certified the books as “clean” in a statement issued Friday.

The move came despite a report from Fedeli’s hand-picked financial commission of inquiry, headed by former B.C. Liberal premier Gordon Campbell, stating the government should adopt Lysyk’s method on a “provisional basis” and continue negotiating with her.

Observers noted Fedeli’s higher-than-expected deficit figure includes expanded daycare and other initiatives from Wynne’s ill-fated spring budget that the new Conservative government will never implement.

“It looks very much like political theatre,” said NDP finance critic Sandy Shaw, MPP for Hamilton West—Ancaster— Dundas and a former board chair of FirstOntario Credit Union.

“We’re being set up for an austerity budget,” she predicted, calling Fedeli’s caution of tough times to come “chilling.”

The credit agency DBRS said it is holding Ontario’s credit rating at AA (low) with a stable trend given that the pension asset issue doesn’t affect the government’s cash position — even with the higher deficit number.

“It’s essentially the Liberal budget adjusted for the auditor general’s number and some contingencies,” said Paul Le- Bane, vice-president of public finance at DBRS in Toronto. “There’s no Conservative platform elements built into this.”

Those contingencies include a slowing economy and changes to the accounting for the previous government’s “fair hydro plan” that subsidized electricity rates with long-term borrowing of billions shifted to the books at Crown-owned Ontario Power Generation.

Fedeli would not say how long it will take for the government to balance the budget or what steps that will involve, beyond $6 billion in spending cuts with no public sector layoffs promised during the spring campaign.

He pledged to eliminate the deficit in a “reasonable, modest and pragmatic” manner.

Fedeli took off the gloves in attacking the former government, in power almost 15 years under Wynne and predecessor Dalton McGuinty.

“The Liberals pursued a reckless spree of deficit-financed spending and then deliberately deployed a series of accounting tricks,” the finance minister charged. “They deliberately hid the evidence of this fiscal hole and they attempted to undermine the auditor general when she called them out.”

He called the $15 billion discovered by his commission, a “crippling hidden deficit.”

Although the New Democrats and interim Liberal leader John Fraser insisted the Ford Conservatives will have to cut deeper than the $6 billion promised, Treasury Board President Peter Bethlenfalvy vowed the target won’t change.

“We’re going to stand behind that,” he told reporters, noting it amounts to four cents on every dollar of spending. “This is not about cuts. It’s about transforming the way the government runs its businesses, about modernizing government services … without threatening front-line workers.”

Aside from running a $3.7-billion deficit while claiming the budget was balanced, the Liberals booked $1.4 billion in “efficiencies” not yet achieved and lowered the fiscal emergency reserve by $300 million, said Fedeli, who boosted the emergency fund back to $1 billion.

“Only when the government of Ontario truly accounts for its real deficit position can we begin to put the province back on a path to fiscal sustainability,” he said.

Fedeli’s language is ridiculous because the accounting spat with Lysyk and the hydro plan liabilities shifted to OPG were well known before the election, said Fraser of the Liberals.