Ontario government chooses deficits and debt—again

The Ford government last week presented a “mini-budget,” which, among things, stuck Ontarians with yet another multi-billion dollar deficit despite a golden opportunity to balance the books.

Let’s dive into the numbers. In its 2024 budget tabled in the spring, the government forecasted a deficit of $9.8 billion for this year. This number includes a $1 billion reserve fund for unexpected expenses or revenue hits, which we can exclude from this analysis. So, excluding reserves, the deficit was pegged at $8.8 billion this year.

Last week’s mini-budget, however, contained two surprises, which together could have eliminated the deficit almost entirely—something the Ford government has in past years promised it would do by this year.

The first surprise—revenue projections are stronger than expected. The government now expects to take in $6.9 billion more revenue than the budget forecasted. Secondly, the government’s forecast for debt interest payments has fallen by $1.2 billion over the course of the year so far.

If you put these two surprise developments together, you get an $8.1. billion improvement to the government’s bottom line. That means the government could have reduced the deficit to just $700 million by sticking to its original spending plan—and then gone one step further to balance the books with a miniscule spending reduction of far less than 1 per cent.

Instead, the government cranked up spending further by $5 billion beyond the original budget plan. As a result, instead of a balanced or nearly balanced budget, Ontarians face another substantial deficit. And Premier Ford’s promise to balance the books remains unfulfilled.

Indeed, this decision to run a deficit of choice (not a deficit of necessity) is completely at odds with the past rhetoric of Premier Ford and his surrogates about the importance of spending restraint to avoid saddling future generations with new debt. Vic Fedeli, Ford’s first finance minister, spoke eloquently and reasonably when he said that balancing the budget is “not only a fiscal imperative, but a moral one.” Last week’s mini-budget shows just how far the Ford government has drifted from that view.

Why should Ontarians care? One reason is the expense associated with paying interest on government debt. Over the past five years Ontario’s provincial government has spent $61.4 billion on debt interest payments. Ultimately, this money comes out of the pockets of Ontario taxpayers. It’s not just current taxpayers who must pay the cost of recent debt accumulation, but future taxpayers will bear the burden of today’s debt.

The Ford government frequently complains that it inherited a difficult fiscal situation from its predecessors. However, Ford and company have now had the better part of the decade to keep their promise of balanced budgets and debt reduction. At this point, the government’s failure to keep these promises is clearly a policy choice. The nearly uninterrupted string of deficits has added billions to the province’s net debt (total debt minus financial assets), which will reach a projected $429 billion by the end of this fiscal year—that’s $21 billion higher than at the end of 2023-24.

And last week, once again, rather than nearly balancing the budget by simply sticking to its spring spending plan, the Ford government chose to splash yet another budget document in red ink.