On Thursday, as a forensic accountant, I “drilled down” on Finance Minister Vic Fedeli’s first PC government budget to develop an understanding of its key points. Here is what I found.
- Fedeli’s first budget does not bury the bad news.
Most people know what they earn, spend and how much they owe. Governments can be more reticent to put this information front and centre for the public, often preferring to place these key details deep in their reports
As a forensic accountant, I am used to reading budgets and similar documents from the last page up to find such key spending details.
To his credit, Minister Fedeli puts Ontario’s 2019-20 income statement and debt picture on page 7 of his 343-page “Protecting what matters most.” In last year’s Ontario budget, this key information first surfaced on page 172. The 2019 federal budget provides this information on page 272. Thank you, Minister Fedeli.
- Ontario taxes more and spends more, per capita, than Ottawa.
Many people think Ontario’s budget is second fiddle to Ottawa. Yes, Ottawa in total takes in more and spends more than Ontario. But on a per capita basis, Ontario is much bigger than Ottawa on revenues, spending and accumulated debt.
Ontario is projecting total revenues at $152 billion or $10,500 for each of 14.6 million Ontario residents. Ottawa’s recent budget forecasts $338 billion or $9,100 of revenue for 37.2 million Canadians. Ontario’s revenues are 15 per cent larger on a per capita basis.
For spending, Fedeli is projecting total program spending of $150 billion; the Ottawa equivalent is $329.4 billion. Ontario per capita spending of $10,239 will be 16 per cent higher than Ottawa’s equivalent of $8,845.
- Before annual debt costs, both Ontario and Ottawa are just treading water.
Before interest on debt, both Ontario and Ottawa have modest surpluses. Ontario has a $4.1 billion operating surplus ($280 per person). Ottawa’s operating surplus is $9.4 billion ($252 per Canadian).
However, both Ontario and Ottawa are submerged in debt and the costs of servicing such debt.
Ontario will be spending $13.3 billion this year or $910 per Ontarian to pay its interest tab. That is 8.6 cents of every dollar collected by Fedeli.
Ottawa’s interest spend will be $26.2 billion or 7.8 cents of every dollar of federal revenues, that is $704 for every Canadian.
- Ontario’s new “Sunshine List,” the debt list.
Ontario government employees who earn more than $100,000 annually are on the province’s Sunshine List. Soon, Ontario families might be on a new Ontario list, the Ontario Sunshine Debt List. With Ontario’s total accumulated debt hitting $360 billion this year that is $24,500 per Ontarian or $98,000 for a family of four.
Ottawa is not far behind. The total federal debt will be $794 billion. That translates to $21,000 per Canadian or $84,000 for a family of four.
Thus in total, that Ontario family’s share of the provincial and the federal debt adds up to $182,000, more than most people realize.
- Ontario — spending cuts for many, more money for a few.
Ontario’s spending will be slightly higher in the first year of the PC mandate. The Ontario budget comprises 25 major line items, ranging from agriculture to treasury board.
Fedeli wants to balance the budget in five years, and along the way, some ministries will get more funding and others will see reduced funding. In 2019-20, Ontario will be spending $163.4 billion with debt service costs, 1 per cent more than in the last year of Kathleen Wynne’s government ($162.5 billion). However, in that $163.4 billion there are both winners and losers.
In total there are 19 ministries that are losing funding and six that will gain funding
Among the 19 losing ministries are:
- Agriculture. Down $284 million (24.4 per cent).
- Children and Community Services, down $376 million (2.2 per cent).
- Environment, Conservation down $352 million (35.8 per cent).
- Indigenous Affairs, down $72 million (49 per cent).
- Training, Colleges and Universities, down $737 million (6.1 per cent).
The ministries that gain with this budget are:
- Education, up $793 million (2.6 per cent).
- Health, up $1.35 billion (2.2 per cent).
- Infrastructure, up $71 million (15.6 per cent).
- Solicitor General, up $58 million (2 per cent).
- Transportation, up $511 million (10.9 per cent).
- Treasury Board, (including debt service costs), up $119 million or 7.8 per cent.
- The final budget page — a transit surprise for Toronto and the TTC.
Last week, Ford announced proposed new transit lines for the GTA. In reading the last page of the budget, it became clear that one aspect of this new transit program was not mentioned.
Page 343 has a notice of legislative amendments for the Ministry of Transportation. The proposed legislation will authorize inspectors to audit and examine transit infrastructure of the TTC and the City of Toronto. The budget states that “where the City or the TTC is not complying with an inspector’s request,” a court order can be obtained “directing the City or TTC to comply.”
The budget is silent on key details of this transit audit, including the inspection standard, the basis for an inspector’s request and who will pay the costs of complying with such a request. Details are needed.
As Ontario’s budget is debated in the Legislature and more review is undertaken, more insights and perspectives will emerge on this first effort by Finance Minister Fedeli.
Charles Smedmor is a chartered accountant who specializes in forensic and investigative accounting.
https://www.thestar.com/opinion/contributors/2019/04/12/a-forensic-accountants-take-on-the-ontario-budget.html
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