The Parliamentary Budget Office (PBO) recently published its annual fiscal sustainability report, which provides long-term projections to assess the sustainability of public finances for the federal government and the provinces. In this context, sustainability simply means that a government’s debt load does not grow continuously as a share of the overall economy.

The projections for provincial governments were worrying. Canada’s population is aging. As more people retire and exit the work force, health-care costs and retirement benefits will likely increase while there will be proportionally fewer people in the workforce, putting downward pressure on tax revenue. These demographic trends will create fiscal challenges across the country and the PBO report makes it clear that our provincial governments just aren’t ready.

The data for Central Canada included several important data points and surprises. In Quebec, there’s actually good news, as the PBO projections show that province on track to shrink its debt burden considerably over the next 25 years. In fact, the PBO concludes Quebec is the only province whose financial trajectory is sustainable at the present moment.

Again, this is good (and perhaps to some surprising) news in a province that has (deservedly) long had a reputation for its troubled public finances. It should not, however, be cause for complacency. By the PBO’s account, Quebec is currently the most indebted province relative to the size of the provincial economy. The outgoing Couillard government did important work stabilizing the province’s fiscal situation, balancing the budget, essentially ending debt accumulation and getting the debt-to-GDP ratio headed in the right direction. This work earned Coulliard the second-highest ranking in Canada in the Fraser Institute’s most recent Premiers’ Report Card, which assessed the prudence of fiscal policy in all 10 provinces. So the province is headed in the right direction, but with such a large stock of debt, it’d be a big mistake to think Quebec is out of the woods.

Further, Quebec is a high tax jurisdiction, which takes money out of the pockets of Quebecers and hurts economic performance. Reforming the tax system for growth and lowering distortive rates while keeping the positive momentum on the health of public finances will require a long-term commitment to spending discipline.

As for Ontario, its fiscal problems are well-documented. With the largest nominal debt load of any subnational jurisdiction in the world, and a $15 billion deficit this year, it’s clear a course correction is overdue. The PBO underscored this reality, showing the province’s debt-to-GDP ratio (already near its highest point in history) is on track to increase by 10 percentage points over the next 25 years. Given Ontario represents 40 per cent of the country’s population, its fiscal problems are a matter of national concern and the PBO report highlights the need for action.