Ontario deficit billions more than expected

TheStar.com – Hot Topics – Ontario deficit billions more than expected
October 22, 2009.   Robert Benzie

Ontario’s already record budget shortfall has ballooned to a staggering $24.7 billion – billions higher than economists expected – and “difficult choices” loom, warns Finance Minister Dwight Duncan.

In the fall economic statement tabled Thursday in the Legislature, Duncan revised the deficit projection upward from the $18.5 billion he had announced in June (and the $14.1 billion in the March budget.)

Until earlier this year, the ignominious record was a $12.4 billion shortfall in the 1992 budget introduced by NDP finance minister Floyd Laughren.

“Due to this global recession, our economy is now the same size as it was in 2005. Tax revenues are also now at 2005 levels,” Duncan told the House.

“Corporate tax revenues fell last year by an unprecedented 48.1 per cent – or over $6 billion,” he said.

“At the same time the recession has driven up demand for government services.”

That accounts for the deficit being far worse than the $22 billion leading bank economists had anticipated.

“The governments of Canada, the United States and some other provinces have all adjusted their deficit projections upward for the coming year,” said Duncan, noting Ottawa’s is $56 billion and Washington’s is $1.5 trillion.

“Due to the impact of the global economy on Ontario and our government’s desire to invest in the people of this province, the projected deficit is $24.7 billion in 2009-10,” he said.

That’s on a $113.7 billion budget, which includes $104.3 billion in spending on programs and $9.4 billion on interest paymentsto service a provincial debt that has skyrocketed to $137.9 billion.

Despite the gloomy picture, Duncan emphasized that the Liberals would continue their focus on the big-ticket priorities of health-care and education.

To that end, the government will announce its long-anticipated plans Tuesday for all-day junior and senior kindergarten for four- and five-year-olds.

“This initiative will further increase the competitive advantage already found in our highly skilled and educated workforce,” the treasurer said.

“Full-day learning for our four- and five-year-olds will also help parents take advantage of new job opportunities,” he said, conceding that the government will be “phasing in” the program, which could take years.

“Making this investment will require difficult choices on our part,” said Duncan.

“And we will make them.”

While he was vague Thursday, in a speech on Tuesday, the finance minister said a sweeping review of government programs would be coming in the next few months to determine where cuts can be made.

“We will call on our partners in the public and the broader public sector to help us sustain public services in the long term. We will also review all agencies, boards and commissions to ensure they are meeting Ontarians’ needs and expectations,” he said.

“We made the right choices for today. As Ontario comes out of the recession, we will eliminate the deficit and pay down debt to ensure the sustainability of the public services we all value.”

However, Duncan did not offer a timetable for deficit reduction and elimination.

Opposition parties were flabbergasted at the new $24.7 billion deficit figure, which Progressive Conservative Leader Tim Hudak called “a historically dismal performance” and warned it would boost each Ontario household’s share of the total provincial debt to $13,500.

“The government was living high off the hog,” Hudak thundered in the Legislature. “The McGuinty government is the problem. The problem will not be fixed until we replace the sad, worn out McGuinty government.”

New Democrat finance critic Michael Prue said a deficit this large cannot come without dire consequences for both the public and public sector workers.

“I can read the code words,” Prue said. “They can expect to get whacked in the months ahead.”

On Wednesday, Premier Dalton McGuinty left open the possibility of unpaid furloughs for public servants, including teachers, bureaucrats, and nurses.

That echoed former NDP premier Bob Rae’s “social contract” in 1993, which introduced the phrase “Rae Days” into the vernacular.

While the Liberals privately insist “Dalton Days” are not on the horizon, McGuinty has steadfastly refused to rule them out.

“We’re just beginning this discussion,” the premier said Wednesday when asked about Rae’s response to a recession.

“I don’t know. We’ve all got our own particular approaches obviously. I’ll let people judge, but what I would say is that … the next several months will be very important as we come up to our own particular approach to this.”

Wayne Samuelson, president of the Ontario Federation of Labour, said Wednesday he’s worried the Liberals “are so freaked out about the deficit” they will force workers to take involuntary leave.

“They’re heading for a $20 billion deficit and it doesn’t look like they’re ready to raise taxes and it’s pretty clear that the economy is not going to grow so there’s not going to generate extra money there,” said Samuelson.

“You can (have furloughs for public servants) or you start privatizing services and selling things off.”

The Ontario Public Service Employees Union (OPSEU) urged the Liberals to resist the temptation to privatize or cut.

“Every dollar spent in the public sector not only provides a service that people need, but also provides income that supports families, communities and local businesses,” OPSEU vice-president Patricia Rout said in a statement Wednesday.

“The track record of privatization is one of higher costs, reduced services, poorer jobs and structural deficits,” said Rout.

< http://www.thestar.com/news/canada/article/714276–ontario-deficit-billions-more-than-expected >.
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Graphic: Ontario revenue and expenses:
< http://multimedia.thestar.com/acrobat/53/20/4361025d42a090da7bc2d9b40272.pdf >

Graphic: Harmonized sales tax:
< http://media.thestar.topscms.com/acrobat/a9/03/946e2ace4f94a373154a4c57e54f.pdf >.

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