By MPP Toby Barrett
In his recent report, Ontario’s Financial Accountability Officer, Stephen LeClair, has projected a $3.5 billion deficit in fiscal year 2017-18.
“Why would the average Ontarian care?” he mused during his media conference, and then reminded those present that during the last election a promise was made by the present government to balance the books by 2017-18.
As Opposition Leader Patrick Brown explained in the Toronto Star, “They’ve backed themselves into a corner. They have no way out other than to raise taxes or cut services,” adding “they want to cut funding to doctors, close needed schools and raise hydro rates, all because of their incompetence.”
Financial Accountability Officer LeClair explains, “Over the period from 2010-11 to 2014-15, Ontario reduced the deficit by an average of $0.9 billion per year. To achieve balance in 2017-18, the government plans to reduce the deficit by an average of $3.4 billion per year, a rate of improvement nearly four times greater than the pace of the past four years.”
Growth in Ontario’s economy has slowed markedly since the robust expansion under the Mike Harris government. Over the period from 1995 to 2000, the average annual growth rate of real GDP was 4.6 per cent. Over the past eight years, Ontario’s real economic growth has averaged just 1.2 cent per year.
Between 2007-08 and 2009-10, personal income tax revenue dropped 8.1 per cent while corporate tax revenue dropped by over 50 per cent. At the same time, Ontario’s program spending increased sharply by $11.5 billion in 2009-10 from the previous year, largely as a result of stimulus spending on shovel-ready infrastructure.
The FAO reports Ontario’s economic growth over the past eight years has been largely driven by household spending, residential investment and government expenditures. On average, net trade and business investment have been a drag on overall economic growth since 2007.
In 2000, Ontario merchandise exports to the U.S. represented 9.8 per cent of total U.S. imports. By 2014, Ontario’s share had dropped to just 5.5 per cent.
Long-term unemployment has worsened compared to pre-recession levels. It remains at 19 per cent, six percentage points higher than prior to the recession. Research has shown that long-term unemployment can seriously damage a worker’s long-term prospects.
From January to May 2015, the average wage settlement of 1.5 per cent for Ontario broader public sector employees is the highest increase in four years.
Health sector spending is projected to increase by an average of 1.7 per cent per year from 2014-15 to 2017-18, well below the three per cent annual average pace from 2010-11 to 2014-15 – hence the measures to reduce physician fees and move towards activity-based hospital funding.
Education spending is project to grow by less than half the pace of the past four years – primarily by closing schools.
Ontario’s $300 billion debt is now equal to 40 per cent of our Gross Domestic Product. Moody’s currently maintains a negative outlook, and S & P downgraded Ontario’s credit rating on July 6, 2015 which could increase borrowing costs.
Interest on debt is expected to increase by almost 25 per cent from $10.6 billion in 2014-15 to $13.2 billion by 2017-18. Almost 10 per cent of total spending will go just to pay this debt interest!
Ontario’s next update will be the Fall Economic Statement