Ontario budget faces crippling health-care bills

Province must find $4B soon to pay for seniors’ treatment

Ontario needs to raise taxes or cut spending by $4.1 billion next year to get ahead of an aging population’s demand for health care, the provincial government’s budget watchdog says.

We could wait, allowed David Wake in a report issued Oct. 19, but every year we put it off the sharper the “fiscal adjustment” will have to be. And even then, don’t expect the burden of the Ontario government’s debt to get much smaller over the next generation, as the Liberals have promised it will.

The problem is one everyone has acknowledged for years: we have a demographic bulge of baby boomers leaving the workforce, ceasing to pay major taxes and beginning to need a lot more health care. It’s now beginning to happen and we are not ready for it. To get ready, we need to pay off some of the substantial debt we already have so we can spend on health care instead of interest.

Four billion dollars — this is what’s needed after the forecast accounts for economic growth and all the other big forces pushing and pulling on the provincial budget — is a lot of money, even in a government the size of Ontario’s. It’s more than the health premium tax brings in, more than the provincial gasoline and tobacco taxes combined. It’s about as much as the budget for the Ministry of Transportation. It’s not money they’ll find under the seats at the Ministry of Finance.

“Convincing Ontarians of the need for immediate fiscal restraint of this magnitude would be challenging for any Ontario government. Since the demographic pressures on the budget will not intensify until the mid-2020s, it will be tempting for governments to ignore or postpone the needed adjustments to fiscal policy,” Wake’s report says.

If we get on it now, we can pay off some debt and free up interest payment money that we’ll be really glad to have to plug holes in the health budget in a few years. If we wait till 2025, just seven more years, we’ll need to find $6 billion instead of $4 billion. That assumes the government also just gives up on the Liberal promise to steadily reduce the province’s debt load indefinitely. Instead, it’ll go down temporarily but then rise again a couple of decades out.

“Importantly, if the needed fiscal adjustments are postponed, the burden of stabilizing Ontario’s public finances would be increasingly shifted from the baby-boom generation to younger Ontarians,” Wake’s report says. They (OK, we) will be the people paying taxes in the 2020s when they have to go up even more sharply to cover retirees’ medical bills. Alternatively, the government could cut health care, ha ha.

But it’ll take some steel for a government to say it’s going to hike taxes or cut services, run a steady surplus for years, and not give in to the endless temptation to either spend the extra money or give voters tax cuts.

This kind of nerve is not built into our political culture. When Liberals find extra money, they tend to spend it and say that’ll make us even richer as they cut ribbons on new stuff they’ve bought; when Tories do, they tend to cut taxes and say that’ll make us even richer as they stand in front of charts showing Joe Sixpack’s next T4 slip.

“Balancing the budget has added stability to Ontario’s finances and positions the government to better respond to demographic challenges and unexpected global economic shocks that the province may face in the future,” Finance Minister Charles Sousa said in a boilerplate response that didn’t engage at all with the forecast’s warnings. “We will continue to manage any global economic challenges that arise along the way. With a steady and balanced approach, Ontario is positioned well for the future.”

The takes out of the financial accountability office have always been more jaded than the ones emanating from Sousa’s ministry, which is what we have a financial accountability office for.

Surprises can happen. Not usually delightful ones.

We can hope for good luck or we can start cracking on a massive economic challenge we’ve seen coming for decades. Looks like we’ll hope for good luck.