Ont. deficit could linger for years: McGuinty

Ontario Premier Dalton McGuinty says it will likely take more time to eliminate the current deficit than any deficit in the province's history.

In a year-end interview, the premier told CBC News that finding a way out of the roughly $25 billion funding shortfall brought on by the recession will be one of the province's biggest challenges in 2010.

"The circumstances that gave birth to this deficit were nothing short of extraordinary, so it would be unreasonably painful for us to say we're going to get rid of it in three or four years," McGuinty said.

"We've lost thousands and thousands of jobs — some communities have been pretty well devastated — and we've lost thousands and thousands of businesses," McGuinty said.

He said the province tried to react to the global recession quickly by introducing $32 billion in stimulus funding and investing in job creation and second-career programs, but he said slow economic growth will continue to be an issue in the province in 2010.

Ontario must 'modernize' tax system: McGuinty

McGuinty defended the province's decision to introduce the Harmonized Sales Tax (HST) – a single tax that blends the provincial and federal sales taxes — saying that the province needs to "modernize" its tax system to stay competitive.

'We need to transform our tax system. It's 50 years old," —Ontario Premier Dalton McGuinty

The opposition parties attacked the HST, arguing that it was a tax grab that would add an eight per cent sales tax to items that are currently exempt from the PST, including gasoline and heating.

But the government passed the controversial legislation in December, and the province plans to introduce the blended sales tax on July 1.

"I am absolutely convinced that we need to do what 130 countries have already done, what four other provinces have already done, what B.C. is already doing," McGuinty said. "We need to transform our tax system. It's 50 years old."

EHealth, Smitherman departure biggest challenges in '09

McGuinty said his most difficult moment of 2009 was losing deputy premier George Smitherman, who quit his post to run for mayor of Toronto in 2010, but he said dealing with fallout from the eHealth spending scandal that was uncovered last summer was also a challenge in 2009.

A report released by Ontario Auditor General Jim McCarter in October found that taxpayers had "not received value for money for this $1 billion investment" in eHealth, a provincial agency charged with creating an electronic health records system.

"The auditor made a specific finding, and I just couldn't agree with him more," McGuinty said. "He said we came up short, as a government, when it came to having the necessary oversight in place. We failed to closely watch people who are doing important things for the government."

He said the province has introduced a number of changes to rules governing the supervision of spending and procurement based on the auditor general's findings.

"This was a case of failure of oversight, and we've learned our lesson," McGuinty said.

McGuinty said the province has a solid foundation for growth in 2010 and beyond despite the economic setbacks of 2009.

The premier, who plans to run for re-election in 2011, wouldn't present a specific timeline for balancing the budget, saying Ontarians will get a better sense of the province's plan when the finance minister delivers his budget in the spring.