Ontario Has Largest Sub-National Debt In The World

By MPP Toby Barrett

People in Ontario, and those in financial circles around the globe, are realizing there’s a new evil on the dark side – a force that is out of control and growing stronger.

Greece and California have long been held up as the poster children for unsustainable government debt. But Ontario’s government-issued bond debt – now close to $300 billion – is actually higher than California’s and is only 10 per cent less than the debt of the entire country of Greece.

Ontario’s debt per capita, at $21,509, is more than five times California’s ratio of $3,844. California’s population is three times that of Ontario. Ontario’s debt is higher than any other province or state anywhere, meaning we have the largest subnational debt in the world.

Concern with the debt was again highlighted in this year’s Auditor General’s Report – a report released just before Christmas and largely overshadowed by the hustle and bustle of the season. Auditor General Bonnie Lysyk stressed the danger of our huge debt burden: $11 billion in interest payments every year taking money away from other programs, vulnerability to interest rate increases, and credit-rating downgrades.

Back in 2008, Ontario debt per person was only $12,000, but by 2018 is expected to grow to $23,000. In personal finances, the borrower expects to get something for the debt – a new car or a house for example. What did we get for the province’s increased debt? Longer health care wait times, school closures, higher taxes and less take home pay.

Paying an annual debt interest of $11 billion is now the third largest expense in the government budget, after health and education. According to the Fraser Institute, in Ontario, the government expects to spend $11.3 billion on interest payments – more than the entire $11.1 billion budget for the Ministry of Community and Social Services and close to the $11.9 billion being spent on schools, hospitals and roads.

Another measure of financial health for government is the debt to GDP ratio. GDP (gross domestic product) is a measure of all the products and services produced within a jurisdiction’s borders. Ontario’s net debt to GDP ratio has grown to 39.5 per cent. Not surprisingly, Lysyk suggested the government develop a plan to address its high debt and to bring the debt to GDP ratio from 39.5 per cent down to 27 per cent. These are similar to the comments in her report of a year earlier. It’s obvious the government didn’t heed her suggestions with total expenditures increasing from last year. Credit rating agencies however did react by downgrading the province yet again.

And remember, the Auditor General did her report with numbers as of last March. Since then, the provincial debt has increased by $11 billion. According to the Canadian Taxpayers’ Federation debt clock, it increases at about $20,000 every minute.

Ontario’s debt is not sustainable and must be addressed. The chickens always come home to roost when spending is this far out of whack.

Our province is known for many things – mining, forestry, Niagara Falls, and Wayne Gretzky – but Ontario’s dubious distinction of the highest sub-national debt in the world has clearly put us and our descendants on the dark side.