Ontario budget: big spending, higher deficit in election style pitch

WATCH: Some of the highlights from the Liberals budget

TORONTO – The big shocker in Thursday’s make-it-or-break-it Ontario budget wasn’t between the pages, but who didn’t show up to read it.

In a stunning move unheard of in recent memory, NDP Leader Andrea Horwath – who can decide the fate of the minority Liberal government – skipped her first opportunity to read the $130.4-billion spending blueprint, heightening speculation that the province is headed to the polls.

Opposition leaders are usually among the politicians, stakeholders, bureaucrats and journalists who are locked in a room to read the budget before it’s tabled in the legislature – an annual tradition to preserve its secrecy.

READ MORE: 5 Ontario budget items that will hit your pocketbook

But despite Horwath’s insistence that she must see the document before deciding whether she’d prop up the Liberals for a third straight year, she dodged the lockup along with reporters’ questions about whether her party will trigger an election.

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Finance Minister Charles Sousa said Horwath let Ontarians down by not attending the lockup to state her position.

“I’m perplexed as to why the leader of the third party would not stand before Ontarians in terms of what it is that we are discussing today because this is about the well-being of Ontarians,” said Sousa.

“It’s not about the well-being of any political party or the fortunes of any political party. It’s about the fortunes of Ontarians and they deserve to know where it is that they’re at, because this is the right budget, it’s the right plan.”

Politicians make a good salary to show up for work, but Horwath decided to “duck and run,” said Progressive Conservative Leader Tim Hudak, whose party plans to vote against the budget.

2014 Ontario Budget: Overview Charts


Horwath didn’t miss much, as most of the budget had already trickled out through campaign-style government announcements and unauthorized leaks.

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They included ambitious promises for a provincial pension plan, levies to raise billions of dollars for public transit, roads and bridges, billions more for corporate grants, a minimum wage hike and higher taxes for individuals earning more than $150,000.

Sousa had also made it clear in recent weeks that Ontario’s revenues came up short last year and the government would likely miss its deficit targets, although it still planned to slay the deficit in 2017-18.

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The Liberals are expecting to spend $12.5 billion more than they take in this year, up from $11.3 billion last year and the $10.1 billion projected in their 2013 budget.

Last year’s revenues came in $1.2 billion short to $115.6 billion, largely due to a sharp $1.5-billion drop in sales tax revenue. Officials attributed the decline to one-time adjustments from the federal government – which calculates the province’s share of the HST – from past years and lower consumer spending.

Total spending, including payments to service the debt, came in $636 million less than expected, mainly from austerity measures to clamp down on public service retiree benefits and pensions and “constraint measures” from ministries as well as savings in the education sector due to lower student enrolment, construction delays and balanced school board budgets. Interest on the debt was also $49 million lower than forecast last year.

But spending is forecast to jump by $3.4 billion this year, $900 million more than projected in the 2013 budget, with program spending expected to climb by nearly $3 billion to $119.4 billion.

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That’s going to help push up the province’s net debt by $20.1 billion to $289.3 billion this year, a staggering 40 per cent of gross domestic product. The net debt-to-GDP ratio is expected to reach 40.8 per cent in 2015-16 before coming down.

Ontario’s current ratio of nearly 39 per cent is almost 50 per cent higher than it was just six years ago, which represents “a longer-term vulnerability” for the province, said TD Bank deputy chief economist Derek Burleton. Debt rating agencies will be watching that figure closely.

“The government still faces an enormous fiscal challenge,” he said in an interview.

2014 Ontario Budget: Winners & Losers

“After four years of restraint, getting operating spending down and implementing a lot of the Drummond commission (austerity report) proposals, they still have four more years ahead to get back to balance. And it’s important to get back to balance and stabilize the debt-to-GDP ratio.”

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The Liberals have beat their budget targets five years in a row and are planning to hold program spending growth to one percentage point below revenues until the debt returns to pre-recession levels of 27 per cent of GDP, he said. They also have the lowest program spending per capital among the provinces.

Many of their spending announcements are spread out over a number of years, such as $11 billion to repair and build new schools and $11.4 billion to expand and improve hospitals over 10 years.

Some of their shiny new programs, such as the Ontario Retirement Pension Plan, won’t cost them a thing since it will come out of the pockets of workers and employers. They’re also looking to “unlock the full value” of their assets, including Ontario Power Generation and the Liquor Control Board of Ontario.

But ratcheting down that key debt-to-GDP figure won’t be easy, Burleton said. The province would likely have to hold spending at three per cent for the next decade, given the current economic growth projections.

The Liberals say they’re aiming to save $250 million in their programs this year and double it over the following two years, with public servants squarely in their crosshairs.

2014 Ontario Budget: Budget Highlights

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With compensation accounting for over half of Ontario’s program spending, the budget said any wage increases must be absorbed within existing budgets through “efficiency and productivity gains, or other tradeoffs.” They’re also planning to find $1.4 billion in savings by 2017-18 from public-service retirement benefits.

The Liberals are already in showdown with AMAPCEO, the union that represents many managers and professionals in the civil service, with a possible strike or lockout looming in mid-May.

But other public-sector workers in the education and health-care sectors – groups that have traditionally supported the Liberals – will see their paychecks increase. The budget proposed raises for personal support workers, early childhood educators and other licensed child-care workers, leaving the impression that the Liberals may be circling the wagons before a possible election.

“Let’s end this illusion this is any kind of economic plan,” Hudak said. “It’s a plan to secure Liberal seats. I want to have a plan to get our province moving again, to secure more jobs for real Ontarians, not politicians.”

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