TORONTO—Ontario's financial watchdog says the province's deficit will rise to $12.3 billion this fiscal year—half-a-billion more than he predicted before the spring election but less than the Progressive Conservative government's own projections.
Financial Accountability Officer Peter Weltman said yesterday that policy decisions such as cancelling the cap-and-trade program and reversing several tax increases, combined with a weaker economic forecast, contributed to the change.
In his fall economic and budget outlook, Weltman said that without further policy changes, the deficit is expected to exceed $16 billion by 2022-23.
The government's fall economic statement did not include a budget forecast beyond this year, which means it's unclear if or when it plans to balance the books, much less how, he noted.
Balancing the books in one mandate would require “significant changes” to policy that could have wide-ranging impacts on Ontario households and businesses, however, particularly since the government has committed to not raising taxes, Weltman added.
The province would need to limit the growth in program spending to 1.2 percent per year, which the FAO said would represent the slowest growth in program spending over a four-year period since the mid-1990s.
“The province . . . needs to articulate a fiscal strategy," Weltman said, adding Ontarians would benefit from an informed debate on the government's budget objectives and "the trade-offs necessary to achieve them.”
In a statement released yesterday, Finance minister Vic Fedeli said the report shows the government inherited a structural deficit from its Liberal predecessors.
“The previous government recklessly spent taxpayer dollars and we must continue to work towards finding efficiencies in order to return to balance in a responsible, pragmatic way,” he noted.
The minister did not, however, address any of the contents of the report, nor did he give any indication of the government's path to balance.
The FAO report comes roughly six months after its previous economic analysis, which was issued just weeks before the provincial election.
At that time, the watchdog said the province's deficit would jump to $11.8 billion in 2018 as a result of higher spending in the budget presented by the then-governing Liberals, as well as weak revenue gains.
The Liberals had projected a deficit of $6.7 billion—a figure that also was called into question by Ontario's auditor general.
The Tories since have accepted the auditor general's accounting but said a commission of inquiry and financial review convened to examine government spending found the province's deficit will grow to $15 billion this year.
They said this fall that various savings measures had brought that number down to $14.5 billion.
The FAO said the government's number includes reserve funds and relies on a more pessimistic assessment of tax revenues.