TORONTO – Ontario’s fiscal watchdog says the Liberal government will run a deficit this fiscal year, despite claims it has balanced the budget.
In a new report Monday, the Financial Accountability Office said the Liberals will run a $4 billion deficit in 2017-2018, and will continue to be in the red over the next few years.
More moderate growth in revenues and the increasing fiscal impact of the province’s Fair Hydro Plan, which cuts electricity rates by 25 per cent, will take their toll on Ontario’s books the report notes. It also says a long-simmering accounting dispute between the Liberal government and Auditor General Bonnie Lysyk over how to count two public sector pension plans on the ledger is contributing to uncertainty.
“We’ve been very consistent that because of a number of factors we think the deficit will re-emerge,” said FAO chief economist David West. “Now, with this accounting debate it will become more significant.”
The Liberals presented a balanced budget in the spring, a year ahead of the provincial election, and have promised to keep the books in balance through the next couple of years.
The FAO, however, projects the government’s budget deficit will grow to $9.8 billion in 2021-2022.
“The government is out borrowing this money,” West said. “This current year they’re going to borrow $23 billion in the markets. That’s going to rise to $45 billion in the coming years.”
The FAO also said the government’s new hydro plan will add $3.2 billion to the budget deficit by 2021-2022.
Last year Lysyk questioned the province’s decision to include a pair of public pensions – the Ontario Public Service Employee’s Union Pension Plan and the Ontario Teacher’s Pension Plan – as assets on its balance sheet.
The FAO said in its report that since the government has not adopted the auditor’s recommended accounting for both the pension assets, and with the addition of the Fair Hydro Plan, it is becoming more difficult for legislators and the public to assess the government’s fiscal projections.