Ontario’s budget opens the spending tap, drowns Ontarians in more debt
On Thursday, Finance Minister Charles Sousa tabled the Ontario government’s budget for the 2017/18 fiscal year.
The government’s spin has focused on the fact that the operating budget is balanced for the first time in a decade.
But a deeper look at the numbers beyond this year’s operating bottom line shows that the Wynne government has thrown any semblance of spending restraint to the wind, with the consequence being billions of dollars in new debt to be placed on the shoulders of future generations.
First, let’s look at what’s happening to provincial government spending.
After a few years of modestly restrained spending growth, the new budget calls for significant new spending this year. In fact, program spending for 2017/18 is projected to be up by 4.8 per cent over the preceding year. This increase is much more than would be necessary to offset cost pressures from rising overall prices (inflation) and a growing population. It’s also faster than the expected rate of growth of the underlying economy.
What’s more, 2017/18 spending is now expected to be much higher than was forecasted in last year’s fiscal plan.
For context, last year’s budget said program spending for 2017/18 would be $124.1 billion. Yesterday’s budget shows that the province has failed to stick to its own spending plan, and will in fact spend $129.5 billion this year. That’s more than $5 billion in extra spending for the coming year above and beyond what was expected in last year’s budget.
While the government may say the province can afford this new spending because the operating budget is now balanced, this would ignore the harsh fiscal reality facing the province. The province’s net debt burden has approximately doubled over the past decade and there’s no end to debt accumulation in sight, as the government plans to load up the province with new debt from debt-financed capital spending in the years ahead. Just like debt from the operating budget, all of these new financial obligations must be serviced over time by taxpayers.
So how much debt is the province adding? The budget calls for $34 billion in new debt over the next three years. In other words, the world’s most indebted sub-national jurisdiction plans to see its net debt load increase by 11 per cent over just three years.
This is hardly reason to celebrate. And it punctures the narrative that the government can “afford” this year’s spending spree because its operating budget is finally balanced.
Again, taxpayers will bear the cost of all this new debt, both now and in the future. Ontario debt interest payments now stand at approximately $1 billion per month and are expected to rise 3.9 per cent annually for the rest of the government’s fiscal plan. The requirement to service the debt we’re racking up today will make it harder for future governments to balance their budgets and deliver high-quality public services at reasonable levels of taxation.
Government spin surrounding the budget may focus on the bottom line of this year’s operating budget. But the bigger picture shows a lack of spending restraint and continued growth in provincial government debt that will be passed along to future generations of Ontarians.
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