Fiscal watchdog warns of future deficits in Ontario
The Ontario government should finally balance the books next year, but staying in the black after that “will likely prove challenging,” warns the province’s fiscal watchdog.

thestar.com
March 3, 2016
By Robert Benzie

The Ontario government should finally balance the books next year, but staying in the black after that “will likely prove challenging,” warns the province’s fiscal watchdog.

One week after Finance Minister Charles Sousa tabled his 2016-17 budget, which forecast the deficit being eliminated in 2017-18, the Financial Accountability Office (FAO) predicted red ink could soon flow again.

“The province’s plan continues to rely on relatively optimistic assumptions for revenue growth combined with aggressive plans to limit the growth in program spending,” FAO chief economist David West wrote Thursday.

“Although the budget document outlined some of the government’s planned measures to reduce program spending growth, the details remain vague and the results uncertain,” continued West, who works for Financial Accountability Officer Stephen LeClair, an independent officer of the legislature.

“Maintaining balanced budgets beyond 2017-18 will likely prove challenging as new spending pressures emerge and revenue growth remains moderate,” the economist wrote.

“The government assumes that revenues will increase strongly...mainly buoyed by relatively optimistic economic assumptions, additional federal transfers and new cap and trade proceeds. As well, in 2015-16, revenues were boosted by the first sale of Hydro One equity.”

That’s a reference to the first phase of what will eventually be the sale of up to 60 per cent of the provincial electricity transmission utility, the proceeds of which are going toward new public transit, highways, and bridges.

Progressive Conservative MPP Vic Fedeli (Nipissing) noted “last week’s budget confirmed the government is using one-time revenues and contingency funds to make the deficit appear smaller.”

“One example is using one-time money from the brisk housing market - $500 million in extra sales tax revenue and $300 million more in land transfer taxes - were booked as operating revenue,” said Fedeli, suggesting the Liberals are fluffing the books for the 2018 provincial campaign.

“Every expert sees through what this government is doing...just who do you think you’re fooling with this pre-election number fudging?”

Sousa said he welcomed the FAO communique.

“The FAO confirms that we are on target and on schedule to balance the budget by 2017-18. He specifically highlights the fact that our assumptions for new federal funding are prudent,” the treasurer said.

Sousa emphasized the government’s growth assumptions are based on those from private-sector economists.

“Three economic experts reviewed our economic forecasts and affirmed that they are reasonable,” he said.

NDP Leader Andrea Horwath said she’s concerned the Liberals’ sunny projection may mean more Crown assets will be sold or public services are slashed.

“There’s a couple of things that are quite disconcerting,” said Horwath, adding the FAO release “sounds an alarm bell around more cuts in the budget if the government’s going to stick to their commitment to eliminate their deficit on their timeline.”

“That’s worrisome.”