Ontario deficit 11 per cent lower than expected
KAREN HOWLETT
Toronto— Globe and Mail Update
Ontario will emerge from this fiscal year with a deficit of $16.7-billion, but faces another six years in the red as the McGuinty government struggles to come up with a plan to make a major dent in program spending.
The deficit for the year ending this Thursday is 11 per cent lower than the most recent projection of $18.7-billion, showing that the government is making modest progress in shifting gears after spending increases that averaged 6 per cent a year for health care, education and other social programs during much of its seven-and-a-half years in office.
Despite the rosier fiscal picture, Finance Minister Dwight Duncan is still setting his sights on erasing the deficit by fiscal 2017-18. The government isn’t moving up the target date because it wants to allow for uncertain economic conditions, according to a senior government official.
That puts Ontario on a slower course to balancing its budget than both Alberta and Quebec, which are both forecasting that they will be back in the black in 2014. The Harper government had aimed in its budget last week to wipe out the deficit in four years.
It is taking Canada’s largest province longer because its manufacturing heartland was hit hard by the global recession. While the unemployment rate in Ontario is now 8 per cent, up from 9.1 per cent a year ago, the province has yet to recover 15,800 jobs from before the recession. The modest recovery means there will be no influx of new revenue to reduce the deficit faster and shed the province's enormous debt.
The government revealed its latest deficit numbers Sunday afternoon – on the eve of Tuesday’s budget – through orchestrated leaks to the media, including The Globe and Mail.
The lower-than-expected deficit number is still nothing to celebrate, opposition members said.
“What are we supposed to do?” Progressive Conservative MPP Peter Shurman said on Sunday, “say ‘whoopee’?”
New Democrat Leader Andrea Horwath said the government has constantly revised its forecasts “just to save its own political bacon.” Indeed, Mr. Duncan has come out with steadily lower forecasts since October, 2009, when the province’s fortunes appeared to hit their nadir amid $24.7-billion in red ink.
The deficit figure was lower because program spending came in at $113.3-billion in fiscal 2010-11, $2.6-billion less than what Mr. Duncan forecast in last year’s budget. Belt-tightening in many programs, including education where fewer laid-off workers signed up for ministry retraining programs, helped to reduce the tab. As well, interest costs on the province’s debt were $400-million lower than projected.
To compensate for sluggish economic growth, economists at Toronto-Dominion Bank, who are key advisers to the government, are calling for structural reforms to programs, notably health care. In a report last week, TD Economics said the province is spending 10 cents of every dollar on interest charges on the debt, which is squeezing funding for public services.
Mr. Duncan will unveil a task force on Tuesday to study ideas for paying down the debt.
Mr. Duncan’s budget is also expected to lay out his plan to transform government by looking at which services can be better performed by the private sector and to curb program spending. In a speech last week, he said he has identified nearly $1.5-billion in savings over the next three years in a number of areas, including the province’s 31 jails.
Nevertheless, Mr. Duncan vowed last week to protect health care and education, two key priorities that together consume 70 per cent of program spending.