Social Policy in Ontario

Yet their April budget has cut deeply into programs for people in Toronto and across the province.

Where did the extra money go? How can the Progressive Conservatives boost the budget by billions of dollars while dramatically shrinking services to people at the same time?

The tragedy of their first budget is not merely its legacy of austerity nor the tyranny of ideology. It is a tale of unforced errors by a newly empowered government that fell victim to its own hubris, costing us billions in budgetary blunders.

By rejecting the bureaucracy’s best advice — dismissing the non-partisan professionals as know-nothings — Ontario’s self-styled “Government For the People” shortchanged the people. Now we are all paying the price for a budget built on a foundation of false assumptions.

And flawed accounting.

On paper, the budget purports to spend a record $163.4-billion — a hefty $4.9 billion more than the last Liberal budget delivered some 12 months earlier.

But those additional billions are not all going toward front line services, nor allocated to future infrastructure. Social services, for example, will be cut by $892 million, reaching $1 billion the year after.

Instead, the money is being misallocated to a fiscal chimera, born of an obsession to redo the province’s books.

Controversial accounting changes would render worthless, for the first time, a hefty $11 billion surplus from a jointly-held pension plan long listed on the province’s books as an asset. By blowing a hole in the budget, the Tories suddenly displaced billions of dollars from regular spending that had to be found — and ultimately defunded — elsewhere.

A note in the government’s financial statements shows $2.7 billion added to the budget deficit in order to “provisionally adopt auditor general’s accounting treatment of pension expenses.” That’s a reference to auditor Bonnie Lysyk’s surprise demand that Ontario stop counting any such pension surplus as an asset — unless the fund fell into deficit (in which case, with utter inconsistency, she’d count it as a liability).

Under the last Liberal government, top civil servants had pushed back against Lysyk, noting that she and her predecessors had fully endorsed treating it as an asset since 2002 (not to be confused with raiding a pension fund, which remains illegal). Ultimately, the previous government heeded the advice of an outside panel of accounting experts who found Lysyk’s analysis fatally flawed — akin to claiming that merely because depreciation is an abstraction, it’s an imaginary number.

Interestingly, another panel appointed by the Tories landed on a similar actuarial analysis, noting that a pension surplus could not logically be worth nothing (as Lysyk had insisted). Yet in their zeal to dismiss and demonize anything that came before them, the PCs ignored all outside advice in adopting the auditor’s audacious demands.

Now, thanks to the magic of restated accounting, the revised PC treatment has added $14.6 billion to the province’s overall debt — which translates into an additional $2.7 billion for the last budget deficit, according to the government’s new numbers. But a close look at the fine print gives the game away as an arcane accounting dispute: “The revised accounting treatment … (has) no impact on the province’s borrowing requirements.”

But there’s more. Another $2.4 billion in indebtedness was added to our budgetary burden, thanks to the auditor’s criticism of a 2017 hydro discount plan enacted by the Liberals under public pressure. Lysyk had argued the refinancing scheme would get lower interest rates if the borrowing went on the province’s books — underwritten by taxpayers rather than ratepayers (via OPG). Cheaper, but not fairer — henceforth the hydro bills of cottagers and affluent customers with outsized properties will be subsided by all Ontarians, rich or poor.

Another $1.5 billion in revenues were forfeited by the Tories in the last fiscal year after they killed the cap-and-trade program that required polluters to pay a price for carbon (with the proceeds going to transit investments and subsidies to schools and hospitals for energy retrofits). A further $308 million in scheduled tax increases were also cancelled.

Together, those tax and accounting changes add up to roughly $7 billion in recurring revenues that must be found elsewhere. Every year.

There’s more to come. Buried in the budget’s fine print is a future fiscal hit in the form of “unannounced revenue reductions and spending measures” — hidden tax cuts in 2021-22 that will put even more pressure on the government to reduce spending, according to a new analysis by the legislature’s independent Financial Accountability Office.

“The budget relies on restraining the growth in program spending to historic lows,” the FAO warns. In a February report, it also noted that future cuts aren’t as easy as Ford makes them sound: “Since Ontario’s program spending is already the lowest in Canada, opportunities for achieving additional spending restraint or reductions may be limited.”

While Ford’s Tories try to appease the auditor, they alienate outside credit rating agencies: New York-based Moody’s responded to the government’s planned accounting and tax changes by downgrading Ontario’s credit rating, citing foregone revenues.

The bottom line?

Never before has an Ontario government spent so much more to deliver so much less. Instead of getting greater value for money, we are losing what we value most — in education, transit, health care and social services.

Martin Regg Cohn is a columnist based in Toronto covering Ontario politics.

https://www.thestar.com/politics/political-opinion/2019/05/25/the-hidden-fiscal-hole-in-doug-fords-budget-that-will-keep-on-hurting.html