Ontario’s projected deficit drops to $9B

Ontario’s projected deficit drops to $9B

The Ontario government is bleeding less red ink, but spending more money than ever before.

Finance Minister Rod Phillips tabled the fall economic statement in the legislature on Wednesday and emphasized the provincial treasury is “back on sound footing” by improving on its deficit target.

A $1.3-billion reduction in the projected budget shortfall — down to $9 billion from the previous estimate of $10.3 billion — is coincidentally the same amount of increased spending that was announced.

“We had the opportunity to invest more in health care, invest more in education and invest more in children and community services and to beat our deficit target by $1.3 billion, so that’s a sign that the plan is working,” Phillips told reporters.

That spending on “critical services” involves $400 million in health care and $200 on education and includes previous government climbdowns, such as the reversal of planned cuts to municipal public heath unit funding.

Opposition parties scoffed at the new deficit number, saying the actual figure will likely be much lower at the end of the fiscal year and accusing Premier Doug Ford’s government of using scare tactics to justify further spending cuts in its push to balance the budget in four years.

NDP Leader Andrea Horwath said the fall economic statement shows Ford’s talk of a new tone from his government is a public relations exercise.

“There is no new era,” Horwath said. “All the government did today is say that the deep, deep cuts they announced in the spring are going to be delayed a little bit but there are still going to be cuts.”

“This is still a government that wants to make class sizes larger, not smaller,” added Interim Liberal Leader John Fraser.

The unexpected $1.3 billion in spending trumpeted by Phillips is “simply a reversal of the cuts in the last budget,” Green Leader Mike Schreiner said, dubbing it “magic math” in a fiscal update that is “silent on electric vehicles” and other low-carbon technologies of the future.

Overall, spending is now projected to be $163.8 billion this year. That figure is $5.4 billion more than former premier Kathleen Wynne’s Liberals had planned to spend in 2018-19 before their defeat by the Progressive Conservatives.

The improvement in the bottom line was fuelled by a “quite robust economy” that has helped the government take in $1.6 billion more than expected in corporate and personal income taxes, Phillips said.

He will cut corporate tax rates for small businesses from 3.5 per cent to 3.2 per cent on Jan. 1.

But deficits are still being forecast until 2023, one year after the next election. The Tories project the shortfall next year to be $6.7 billion, then $5.4 billion in 2021-22.

That means Ontario’s debt — the largest subnational tally in the world — will balloon to $374.8 billion before the budget is balanced.

In September, Phillips revised the 2018-19 deficit down from the Tories’ $15 billion to $7.4 billion, similar to the $6.7 billion Wynne had projected.

That suggests this year’s $9 billion shortfall could also end up being lower by next spring’s budget.

Wednesday’s low-key update was a sharp contrast to last year’s controversial fall economic statement. It was delivered by then-treasurer Vic Fedeli, who was later demoted by Premier Doug Ford 10 weeks after April’s budget.

Last November, Fedeli cut oversight protections for the environment, vulnerable children, and francophones by eliminating the environmental commissioner, the child advocate and the French-language services commissioner as independent officers of the legislature.

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That salvo at Ontario’s francophone minority prompted MPP Amanda Simard (Glengarry-Prescott-Russell) to quit the Tory caucus and sit as an Independent in protest.

In an olive branch, Phillips emphasized the Tories recognize “the important contribution Ontario’s 622,000-strong francophone community makes to our province’s identity and prosperity.

“We are looking forward to working with the federal government to build the Université de l’Ontario français,” he told the house.

While Phillips did not specifically mention the expansion of beer and wine sales to corner stores in his statement to the house, his budget legislation includes enabling provisions that could one day clear the way for that liberalization.

He would not say when consumers can expect to see their favourite brew at their local convenience store.

Under his legislation, cannabis sales will soon be permitted at private retail stores on the site of licensed producers’ grow-ops.

As well, existing weed shops will be allowed to sell online or over the phone for in-store pickups. Currently, the government-owned Ontario Cannabis Store has the monopoly on online sales.

Despite the big spending, 16 ministries will still see department budgets reduced while seven will get increases.

To help families, the government plans to allow free admission for children to unspecified “attractions, museums, galleries, and historic sites across the province.” Details will be announced later.

In order to generate money, the Tories are proposing to sell the naming rights to the Metro Toronto Convention Centre to a corporate sponsor and looking at other measures to bring in cash.

Still unresolved is what the Tories plan to do about accounting for billions of the government’s share of co-sponsored Ontario Public Service Employees’ Union Pension Plan and the Ontario Teachers’ Pension Plan.

Previous Tory and Liberal governments counted the holdings toward the bottom line. But ex-treasurer Fedeli sided with auditor general Bonnie Lysyk, who used to consider them as assets until a 2015 dispute with the Liberal government, that the pension money should not be booked in that way.

Robert Benzie

Robert Benzie is the Star’s Queen’s Park bureau chief and a reporter covering Ontario politics. Follow him on Twitter: @robertbenzie
Rob Ferguson


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