Ontario Premier Kathleen Wynne has touted a balanced budget for the first time in a decade, but political opposition and experts are criticizing the use of the term “balanced” as Premier Kathleen Wynne increases provincial debt to $312 billion this year at a cost of almost $12 billion a year in interest.
“The first measure to address debt is to balance the books. We’ve balanced the budget and now we’re working towards ensuring that we manage it accordingly,” Ontario Finance Minister Charles Sousa said Friday in an interview with Global News’ Alan Carter for Focus Ontario.
“Interest on debt is around $12 billion a year, it’s the lowest percentage of interest on debt in decades in fact, it’s around 8.4 per cent of our revenues where in the past it used to be 15 and 16 per cent. We’ve locked in those low cost rates over 30 and 40 years.”
But provincial debt is projected to grow from $312 billion this year, or around $22,000 for every Ontarian, to an estimated $336 billion in 2019-20.
“It’s not balanced, no. It’s an artificial balance. I actually heard yesterday that it was a ‘fudge it budget’ and I hadn’t heard that term in a while,” Progressive Conservative Energy Critic Todd Smith said Friday.
“But clearly what they’ve done is they’ve taken the one time sale of assets, like the very unpopular sale of Hydro One, and used that money.”
VIDEO: Election strategy behind Ontario Budget 2017
PC Leader Patrick Brown said during the budget lockup the Liberals’ claim they have “fixed our province’s economic challenges by presenting a so-called balanced budget” are false and both the auditor general and the financial accountability officer have warned the “numbers will not add up.”
“They’re saying we’re going to plunge back into multi-billion deficits again in the very, very near future,” Smith said. “So, this is not dealing with the structural deficit that exists in Ontario, this is pre-positioning the Liberal party for the election, which is coming in 2018.”
But Sousa said the net debt in the province is improving and the Liberals are borrowing $30 billion less than they had anticipated.
“So every dollar we borrow — 100 per cent of that goes to build new bridges, new schools, new hospitals, and those capital programs will last for decades,” he said. “And that is a payback that we’re trying to make for the people of Ontario.”
Wayne Petrozzi, a politics professor at Ryerson University, said the government is capitalizing on historically low interest rates in the financing of the debt, as opposed to working to eliminate it.
“They’re taking advantage of those rates and so rather than doing things to accelerate the overall debt — they’re servicing it in effect, rather than paying it down,” he said.
“A balanced budget simply refers to the spending within a current fiscal and by that measure they have balanced the budget. Balanced budget doesn’t mean that you’re debt free.”
Petrozzi added that the while the Liberals aren’t necessarily being “misleading” by touting a balanced budget despite growing debt, the wording of the budget is politically motivated.
“All budgets are always fundamentally political documents. In this case you might say perhaps even more so in light of the current low rates and the low personal rating that the premier has, ” he said.
“We’re not debt free, we have a significant accumulated debt and there’s no denying that. So they are in one sense, they are taking advantage of what is on offer in the way of very low current interest rates and they’re using that to finance debt at a relatively low cost.”
VIDEO: Alan Carter speaks one-on-one with Premier Kathleen Wynne about Ontario Budget 2017
Wynne told Global News Thursday the decision to “leverage assets” have been in the budget for several years and Liberals made the decision to spend on transit, infrastructure, greenhouse gas emissions instead of paying off debt to provide relief to Ontarians during a time of “economic uncertainty.”
“This is absolutely consistent with what I said I was going to do. It’s not about my personal popularity, it’s not about the election cycle, it’s about making sure that at the time when we have the flexibility, we make the investments that are necessary for people — that’s what we’re doing,” she said.
“Even though Ontario is doing better than any other province in the country in terms of economic growth, better than the G7 countries, not everybody is feeling that … people need support and we’re going to provide support.”
Don Drummond, a policy studies professor at Queen’s University in Kingston, Ont. and author of the Drummond Report, said the Liberals made a clear choice to present a balanced budget instead of financing the growing debt.
“Debt burden is still high and certainly in an ideal world they would be running a surplus for a while. But I guess you have to take one step first and getting to a balanced budget isn’t bad,” he told Global News Friday.
“By no means are they completely out of the fiscal woods.”
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Drummond also said that despite the billions in new healthcare spending and free prescription medications for everyone under 25, the Liberals have shown restraint in terms of spending.
“Everybody has characterized that as restoring money to health care or increasing money to healthcare,” Drummond said, noting that Ontario’s population increases by about one per cent each year.
“At 3.3 they are maintaining a reasonably tight degree of restraint in healthcare and they’ve managed to get the media to describe that as being generous.”
Brown further criticized the Liberals for spending more on servicing the debt each year than on transit or provincial highways, the Ministry of Children and Youth Services, senior care, investments in post-secondary education and supporting vulnerable indigenous populations in northern communities.
“Yet the Liberals have no plan in this budget to get debt under control. For the next four years we will pay nearly $12 billion each year servicing the debt — $1 billion a month. Each year we are paying $1 billion more in interest payments on the debt than we did three years ago,” he said.
“This debt does nothing but erode the services Ontario families depend on and places a burden on future generations that they do not deserve. Now how can we justify balancing the books? It’s a scam — the numbers do not add up.”
The net-debt-to-GDP ratio is down to about 37.5 per cent from a high of roughly 40 per cent in recent years, but the government hopes to wrestle it down to pre-recession levels of 27 per cent by 2029-30. In the interim, the government has set a target of reducing that number to 35 per cent by 2023-24.
With files from Alan Carter, Andrew Russell and The Canadian Press