An update of the scoreboard shows it’s competent fiscal management 0, profligate spending 350 billion.
Ontarians are familiar with the goose egg on the accountability side. The provincial debt of $350 billion is the latest forecast for 2021 from Financial Accountability Officer Stephen LeClair. That would be up $50 billion from the level of indebtedness today, largely because of the Wynne government’s 12-year plan to drop some $160-billion in capital spending.
Deficit spending is the norm and will continue to be so. While LeClair suggests the government may be able to balance the budget by 2017-18 as promised, it will immediately be back in the red the following year and thereafter.
As he and Wynne have done previously, Finance Minister Charles Sousa dismisses concerns about deficits, arguing more spending and more debt will actually result in lower debt due to the economic growth generated by infrastructure investment.
Reality checks aside, his optimism is dependent on growth forecasts that have been lowered even since the spring budget.
In the meantime, Ontarians are subject to the worst debt levels in the country.
“Ontario’s debt burden, as measured by this ratio, was the highest in Canada after that of Quebec in 2014-15. Ontario was also just behind Quebec in terms of net debt relative to population. Ontario’s net debt per person was $20,806 in 2014-15, compared to $22,591 in Quebec,” says LeClair in a report released Tuesday. “In contrast, net debt per person was $8,387 in British Columbia, and net assets per person were $3,168 in Alberta in 2014-15.” (Alberta’s financial situation has plummeted since then.)
For every dollar of provincial revenue, Ontario owes $2.40, compared to $1.93 in Quebec and 84 cents in British Columbia. Debt payments are the government’s third-largest expense, the more than $11 billion amounting to nine per cent of revenue each year. The province spends more to service its debt than it does on postsecondary education, for instance.
The situation will get worse, LeClair notes, if interest rates rise or if the province’s credit rating is downgraded, driving up the cost of borrowing. For the foreseeable future, interest rates are expected to remain low, but agencies are looking at Ontario’s handling of finances with a jaundiced eye.
Right now, the province finds itself stretched thin on the financial front, making it susceptible to even small changes in the economy, he warns.
“There are significant risks that could result in a further deterioration of the province’s fiscal position, in both the short and medium-term. Some of these risks are largely outside the control of the government, such as slower than expected economic growth. Other risks reflect government actions such as policy assumptions that prove too optimistic, and spending targets that are overly ambitious,” he says.
“There is little fiscal room to deal with unexpected events.”
In short, the Ontario government is spending more money than it has. Spending more than the economy can keep up with. Spending more than even the inflation argument can attempt to justify. Spending more than we can afford to pay.
Sooner or later, Wynne will have to make cuts and do what’s right for Ontarians who have no stomach for deficits and increased taxes.