Ontario deficit down to $1.9B; higher revenue, use of reserve
Brings government closer to presenting a balanced budget this spring.
TORONTO — Ontario’s deficit for this fiscal year is down to $1.9 billion, due in part to higher tax revenues, a hot housing market and the use of the province’s reserve.
The government had projected $4.3 billion in last year’s budget, and the lower deficit puts the government closer to presenting a balanced budget this spring.
Finance Minister Charles Sousa released the province’s third-quarter finances Feb. 21 and said Ontario’s real GDP grew by 0.7%, led by business exports, consumer spending and real estate investments.
“Overall, these positive economic factors – more businesses succeeding, more people working, consumer confidence improving and exports rising, have had a positive effect on Ontario’s finances ahead of plan,” he said.
Ontario projects real GDP growth of 2.2% in 2017, but said rising interest rates could weaken economic activity.
NDP Leader Andrea Horwath said no one lends any credence to the government
“beating” its own deficit projections.
“Everybody knows that the Liberals inflate their deficit target,” she said. “Then, when they get to the point where they have to make their announcement, lo and behold, they’ve achieved more than they said they were going to. So it’s a silly shell game.”
The finances show the government also used $600 million of the previously $1-billion reserve.
Progressive Conservative critic Vic Fedeli said the use of the reserve and one-time revenue from asset sales such as shares of Hydro One won’t mean truly eliminating the deficit.
“The government will attempt to artificially balance,” he said.
A government spokeswoman noted that the government builds the reserve into its plan “to accommodate for unforeseen changes in revenues and expenses” and it has maintained 40% of it, unchanged from what was reported in the 2016 Fall Economic Statement.
Expenses increased by $1.1 billion, spending that includes $106 million more to fund the Ontario Drug Benefit, nearly $100 million for additional stem cell transplant capacity, and $300 million so far toward an eight-per-cent rebate on electricity bills.
Changes to segregation policies in the correctional system and other justice reforms cost an additional $10 million, $6.5 million more went to wages for the Nishnawbe-Aski Police Service and nearly $6 million went to mental health and suicide prevention programming for children and youth in First Nation communities.
Revenue was $2.5 billion higher than projected, with an extra $1 billion coming from corporate taxes, another $800 million from sales tax – largely due to house sales, which boosted HST revenue – about $730 million more from personal income tax and health tax, and more than $500 million above the 2016 budget projection from the land transfer tax.
Spending on interest on the province’s more than $300-billion debt was also $400 million lower than projected and the net-debt-to-GDP ratio has fallen to 38.3% from 39.6%.