Ontario's $21.3B deficit lower than expected

One day before introducing the Ontario budget, Finance Minister Dwight Duncan announced Wednesday that the Liberal government had managed to shave several billion dollars from the record $24.7 billion deficit he forecast just last fall.

Ontario will have a $21.3-billion deficit for the year ending March 31, down $3.4 billion, or nearly 14 per cent, because of tightened spending and increased government revenues "across the board," including corporate and sales taxes, said Duncan.

"Things have improved," he said. "We're seeing it in our own numbers: upticks in employment, upticks in revenues, upticks in a variety of areas."

Mary Webb, a senior economist with Scotia Economics, said it's always good news when revenues are stronger than expected.

"We have had quite a substantial rebound in Ontario's growth that began in the latter half of 2009 and is carrying through until the first half of 2010," said Webb. "It's reflecting in large part the rebound from extremely low levels of auto production."

'Substantial rebound'

However, the New Democrats accused the Liberals of greatly inflating the original deficit projection last fall and said the pre-budget release of the lower deficit figure was clearly an attempt to make themselves look like good managers.

"They're putting it out today because they want to shape how people will see their efforts," said NDP critic Peter Tabuns. "The management of the message is them saying they're really good when, in fact, they gave people a number that was incorrect in the beginning."

Revenue numbers are better than last fall, when the government relied on projections from private sector economists, but they haven't been restored to pre-recession levels yet, warned Duncan. That means it'll take closer to seven years than the five the government originally thought to balance the books.

"We still have a large challenge, that is to eliminate the deficit eventually," he said. "But we have to do that as we preserve those important investments in our public services, and I can't think of a higher priority for us than our post-secondary education system."

Premier Dalton McGuinty has already announced the budget will include funding for 20,000 new spaces at colleges and universities starting this September, along with a new plan to increase the number of international students in Ontario by 50 per cent.

Thursday's budget will be about jobs and growth as the province recovers from the global economic downturn, with a continuation of the stimulus package first announced in last year's budget, added Duncan.

McGuinty has also said there will be no new taxes or tax cuts in the budget, but the opposition said it doubts the premier's sincerity given that the Liberals recently quietly slapped a new energy-conservation tax on electricity bills to raise $53 million a year.

No new taxes in the budget

The budget is also expected to cover the gap left by a one-time federal boost for child-care subsidies, at a cost of $63.5 million a year, after critics warned Ontario's move to full-day kindergarten for four- and five-year-olds was aggravating an existing daycare crisis. 

Duncan wouldn't say if he would follow the federal Conservative government's lead in the Ontario budget by delaying major spending and program cuts until next year, but he did say there will be continued efforts to limit the growth in government spending levels.

The Canadian Taxpayers Federation said it wants the budget to include a tight timeline for eliminating the deficit and some serious cuts to government spending, noting the Liberals have increased spending by more than 10 per cent a year for six years. 

"It's ridiculously unsustainable, and that's why we're in the fiscal mess we're in," said federation spokesman Kevin Gaudet. "The premier's increased taxes in a number of different areas, not to mention the HST that's coming, so the easiest way to get things back under control is to pull out the axe."