It's déjà vu all over again with Ontario's latest fiscal plan
Ontario Finance Minister Charles Sousa called his updated financial plan a new direction but in truth it had a nostalgic feel. With his government facing considerable fiscal challenges including an $11.7 billion deficit and growing debt, Ontarians desperately needed a new direction. What they actually got was more of the same: increased spending and a government reluctant to deal with core problems.
Ontario is long overdue for a bold plan that restores the health of its public finances. In the absence of swift and decisive action, the province risks piling on more debt and kicking the can into the future, leaving the next generation of Ontario families to deal with the debt problem. And the longer the province delays the tough choices, the more painful the reforms will ultimately be.
By any measure the province is facing serious problems. Over the past decade, Ontarios debt level has almost doubled to $272 billion a point where it is now larger than Californias, the poster child for bankrupt states.
Interest payments on that debt what Mr. Sousas predecessor, Dwight Duncan, called a ticking time bomb will reach nearly $11 billion this year. Money spent on interest payments is money not spent on health care, education, or social services.
Against this backdrop, multiple rating agencies have warned about or even downgraded Ontarios credit worthiness. Yet in spite of these troubling signs Mr. Sousa dismissed the problem and instead used this weeks financial update to announce even more spending.
But out of control spending is precisely what got Ontario into this mess in the first place. For nearly a decade, the government consistently increased spending far above the rate of growth in the economy. Imagine if an Ontario family managed its budget the same way, increasing spending faster than its household income. It would be on a quick path to financial ruin.
It was this failure to exercise fiscal discipline that led to sizeable deficits and ballooning debt. Deteriorating public finances eventually prompted the government in March 2011 to strike a commission headed by former TD bank chief economist Don Drummond to recommend how provincial finances could be returned to a sustainable path.
The Drummond commissions findings were sobering. The government had to implement more than 360 reforms to restrain the growth in spending or it would risk running deficits into the foreseeable future.
While the government largely discarded the recommendations, for a brief time it looked like it was finally starting to comprehend the problem. Over the past two years it held program spending almost constant and at least paid lip service to the need for fiscal discipline.
But this weeks financial update abandoned any pretense of spending restraint and announced a series of new spending promises. For the current year, program spending is slated to grow 4.2 per cent which is well above the 2.5 per cent expected for economic growth.
Conveniently, the government left out details on future budgetary projections leaving Ontarians in the dark about what its future plans entail. It did, however, signal that lower than expected economic growth is on the horizon. Despite the potential for declining revenues and higher spending, Mr. Sousa maintains the province is still on track to balance the budget in 2017-18. Thats some creative arithmetic.
Mr. Sousa can claim that his financial plan represents a new direction until he is blue in the face. In reality he has given Ontarians more of the same. A new course in Ontario is desperately needed.
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