Upcoming budget last chance for Ford government to keep fiscal promises in first term
During their time in opposition in the early and mid 2010s, the Progressive Conservative Party in Ontario was sharply critical of the Liberal governments of the day for failing to balance the budget and racking up historically large amounts of debt. They promised, repeatedly, that given the chance to govern they would make Ontario’s finances sustainable by finally balancing the books.
This Thursday, the Ford government will table its budget for 2022/23 immediately before dropping the writ and kicking off another provincial election. The upcoming budget represents the Ford government’s final opportunity during its first term to lay out a plan to finally make good on this so far unkept promise.
Let’s quickly look at the PC’s commitments, in opposition, to balancing the province’s books. Vic Fedeli, longtime finance critic and the Ford government’s first finance minister, published a regular series of publications titled “Focus on Finance” where he laid out the opposition critiques of Liberal government fiscal policy. In the 2015 version, Fedeli wrote of the deficit “if we don’t take action to address this problem, interest payments will soon crowd out core programs Ontarians care about.” Even since taking office the Ford government has continued to pay lip service to the importance of balancing the books, describing doing so as a “moral imperative” in a fall economic statement early in its mandate.
To date, however, these words have not been met with actions. Instead, the Ford government has continued to run large deficits every year—much larger than those run by the Wynne government in its final years in office. The large deficit of 2020 is more understandable given emergency COVID spending, but those unique circumstances can’t explain the persist elevated spending and continued deficits. In its most recent economic update, the government forecasted two more large deficits in 2022/23 and 2023/24.
In short, the Ford government has not kept its promises to eliminate Ontario’s budget deficit. But why? It certainly isn’t due to a lack of revenue. The provincial government did experience a drop in own-source revenue during the COVID recession in 2020, but this was largely offset by emergency transfers from the federal government. Since then, revenues have bounced back almost entirely to pre-COVID levels (after adjusting for inflation and population changes).
In short, the Ford government has had almost exactly as much money coming in over the past two years as the Wynne government did when it left office, and yet this government has not kept its promise to balance the books. To the contrary, the deficit has actually grown under Premier Ford.
This brings us to the actual cause of Ontario’s continued deficit problem—despite its frequent accusations of profligacy on the part of its predecessors, the Ford government has overseen an increase in real per-person spending. In fact, Finances of the Nation data show the government has increased inflation-adjusted per-person spending by more than 10 per cent between fiscal years 2018/19 and 2020/21.
This spending growth since the Ford government took office is the reason for Ontario’s large persistent deficits, and reversing this growth would be sufficient to bring the budget back to balance. Indeed, one recent analysis showed that by bringing real per-person program spending back to Wynne-era levels from 2015/16 would balance the budget this year.
The Ford government has repeatedly said it’s committed to eliminating the deficits, but there’s been a lot of talk and very little action. The government can start the process of bringing its fiscal policy in line with past rhetoric this week in the final budget of its first term by finally laying out a clear plan for a quick return to budget balance.