TORONTO—Ontario’s Liberal government has finally eliminated its deficit, but its debt is rising to new heights.
The province’s first balanced budget in a decade gets rid of a deficit that had at one point reached about $20 billion, and the government is projecting that balance will continue through to 2020.
The debt, however, is another matter. It is projected to be $312 billion this year, or roughly $22,000 for every Ontarian, and grow to $336 billion in 2019-2020.
The province’s net debt has tripled since the provincial Liberals came to power. In the last budget presented by Ontario’s Progressive Conservatives before the 2003 election, the debt was about $110 billion.
The overall size of the budget, meanwhile, has roughly doubled—from $71 billion in 2003 to $141 billion this year.
Interest on debt is the fourth largest spending area, at $11.6 billion. It is also projected to be the fastest-growing spending area, at an average 3.6 per cent a year from 2015 to 2020, compared to an annual 3.3-per-cent increase in health and 2.8 per cent in education.
There is no plan in the Liberal budget to get the debt under control, said Progressive Conservative Leader Patrick Brown.
“We are spending more servicing the debt each year than we’re spending on all transit and provincial highways, more than we’re spending on the Ministry of Children and Youth Services…more than on care for seniors, more than investments in our post-secondary education, more than supporting northern communities,” he said.
But Ontario Finance Minister Charles Sousa said debt is in fact being managed.
“A first step to managing debt is coming to balance,” he said.
The debt-to-GDP ratio is improving, Sousa said, and the percentage of the budget that goes toward servicing the debt is considerably smaller than it has been in years.
“We’ve locked in those rates over long periods of time to minimize volatility and risk,” he said.
The Ontario Chamber of Commerce was pleased to see a balanced budget, but said it is concerned there is “no clear path for long-term fiscal prudence.”
“While there is no deficit over the planning period, there is also no plan for surplus,” the group representing the province’s businesses said in a statement. “Given that, downward payment on the debt will be pushed beyond the medium term.”
The Canadian Taxpayers Federation questioned what will happen to the budget if interest rates rise.
“It’s balanced on a knife’s edge,” said Ontario director Christine Van Geyn. “If there’s a change in what are right now historically low interest rates, the province could be thrown into really a huge fiscal hole.”
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.