Ontario budget to tackle $25B deficit

Thursday's Ontario budget is expected to contain details on how the province intends to wipe out its nearly $25-billion deficit — probably within the next seven years. 

"We have to get back to balance in a reasonable framework," Finance Minister Dwight Duncan told reporters earlier this week, saying he will reveal his new timeline for slaying the deficit in his budget speech.

Premier Dalton McGuinty recognizes that the deficit needs to be tackled, but says the Liberal government "will not do it so quickly as to compromise the quality of the public services that Ontarians want protected — nor will we do it so quickly as to dampen the economic recovery which has just begun."

Last year's budget laid out a plan to balance the books by 2015 — but with added economic pressures the deficit has nearly doubled in the past 12 months. This year it is forecast to hit $24.7 billion. McGuinty now says the target date will be hard to meet.

"Ontario families are telling us, 'Don't move so quickly that you make cuts to our schools and our health care.' On the other side, we've got the responsibility we owe to our kids. They're not going to welcome a plan which takes forever to eliminate a deficit that we incurred on our watch," the premier said.

There are reports the government will forecast another seven years of red ink before moving back into the black.

That concerns deputy Conservative leader Christine Elliott, who says it should be easier for the province to get rid of the deficit because Ottawa is not slashing transfer payments to the province.

No need to rush: Porter

"So we should be able to do it in less than seven years time — but I fear it's going to be even longer," said Elliott.

Douglas Porter, deputy chief economist of BMO Capital Markets, argues there's no need to rush to slay the deficit.

"It's not that critical that they necessarily balance the budget completely anytime soon. But I do think it's relatively important that they do start moving in that direction," said Porter.

"I think [the government wants] to make sure the recovery really does stick and take hold in a much firmer fashion before they really begin to restrain things."  

Porter said he believes the real spending cuts are likely to come next year.

The Ontario budget will be released just after 4 p.m. on Thursday.