Ontario’s fall economic and fiscal statement delivered by this week Finance Minister Rod Phillips reveals a slower process towards budget balance. Revenue in 2019-20 will be $155.8 billion compared to $153.7 billion for the previous year, for an increase of $2.1 billion.

Meanwhile, total spending will rise from $161.1 billion in 2018-19 to $164.8 billion in 2019-20 for an increase of $3.7 billion. As a result, the projected deficit will rise from $7.4 billion in 2018-19 to $9 billion in 2019-20 making for 12 consecutive deficits since 2007-08, the last time Ontario managed a balanced budget.

It’s true, the deficit for 2019-20 is lower than the $10.3 billion originally forecast. But at $9 billion, it’s still the largest deficit since 2014-15. The deficit is expected to decline to $6.7 billion in 2020-21 and $5.4 billion by 2021-22, with a projected balance sometime close to the next provincial election. Relative to the 2018-19 numbers, by 2021-22, revenues will have grown by $11.7 billion—an increase of 7.6 per cent—while total expenditures will grow by $9.7 billion, an increase of 6 per cent.

So, the plan is essentially to slow expenditure growth and wait for revenues to catch up, which suggests it’s business as usual in Ontario given that the “grow your way out of deficits” approach has been used by former governments. The problem with this approach is that by the time revenues catch up with expenditures, there’s invariably an economic shock such as a recession, which opens the gap again and government debt continues to pile up. Incidentally, Ontario net debt for 2019-20 will sit at $353.7 billion—up from $338.5 billion the previous year.

These debt and deficit numbers should ring alarm bells given that the deficit will be $9 billion while the increase in net debt will clock in at more than $15 billion. Why? Because the Ontario government, like many others, separates its operating and capital budget so the deficit is really an “operating” deficit while the spending and borrowing on infrastructure and capital projects gets booked separately. Subsequently, in recent years the surge in capital projects has meant that increases in the net debt have been generally larger than if the increases were the results of deficits alone.

In every year since 2007/08, the increase in the net debt has been billions of dollars more than the amount of the deficit. In 2018-19, for example, the increase in the net debt was $14.7 billion but the deficit that year was $7.4 billion. The year previous, the net debt grew $9.8 billion but the deficit was $3.7 billion and so on. Since 2007-08, the sum of the accumulated deficits in Ontario was $116.2 billion but the increase in the net provincial government debt was $197.1 billion.

So there you have it. Even if the budget is balanced, the net debt and associated debt-servicing costs will continue to grow. Balancing the operating budget is not enough. What’s required to arrest the surge in debt and debt-service costs is an accounting method that spreads capital costs out over time but includes them in the operating budget. If the provincial government continues its current approach of separating capital from operating budgets, then it must make provisions for paying back an annual portion of the capital project principal borrowing via a sinking fund approach.

For example, whenever debt is issued to fund capital projects, the government should commit to make payments on the principal over a 20- to 30-year period with those payments recorded as part of operating expenditure. In other words, if $12 billion in infrastructure spending is borrowed, then assuming a 25-year sinking fund, there would be $480 million a year added to operating budgets over the next 25 budget years to pay down the amount borrowed.

Only in this manner will Ontario be able to fully control its fiscal situation.