On March 28, Ontario’s finance minister Charles Sousa tabled the budget. This is clearly an election campaign document, which bears little resemblance to the fall economic statement of a few months ago.
While the operating budget for the year just ended projects a small surplus, the proposals for the coming years reflect “three years of deficit spending, followed by three years of working our way back to balance.” In other words, six straight years of significant deficits. In addition to the $6.7B deficit for the 2018-2019 fiscal year ($25.4B over 5 years), the government proposes to spend $16B in the coming year on capital/infrastructure, and a total of $106B over the next 10 years, bringing the provincial government debt (net of liquid assets) to over $440B.
While the ratio of provincial government debt to the province’s GDP is “only” 37%, and even with the additional borrowings, is projected to fall to 35.5% in 2024/25, it currently represents 205% of government revenues, increasing to 220% in only 3 years time. Politicians are fond of the debt to GDP ratio as a measure of their fiscal prudence. However, the GDP is a measure of the overall economy, not a measure of the government’s ability to pay off the debt it has amassed on our behalf.
This budget promises new programs and more spending for many groups, including seniors, young families, students, and those on minimum wage. It will be interesting to see whether the voters are prepared to borrow $25B over the next 5 years to fund these promises, and whether businesses and high net worth individuals (who pay the lion’s share of the taxes) will stick around to pay for them.