The Ontario government mapped a slow road to balancing the province's books on Thursday, projecting a deficit of $19.7 billion for fiscal year 2010-11 and saying it would stay in the red until 2017-18.

Ontario Finance Minister Dwight Duncan laid out the province's eight-year plan to tackle the deficit in his budget speech on Thursday. (Canadian Press)

Finance Minister Dwight Duncan tabled a $125.9 billion budget that had little in the way of new spending or direct cuts to programs but promised to reduce the deficit by half in five years and eliminate it completely in eight.

The projected $19.7-billion deficit for the coming fiscal year is just slightly lower than the $21.3-billion deficit forecast for the fiscal year ending March 31 — a record for the province.

Duncan's plan is to slowly put the brakes on spending initiated last year when Ontario's economy was in a recession.

Budget 'realistic and responsible': Duncan

The fiscal plan calls for double-digit deficits for the next five years and a return to balanced books by 2017-18. That's two years later than last year's budget forecast but better than anticipated given that Duncan predicted in October that the 2009-2010 deficit would rise to $24.7 billion.

The finance minister called the budget "realistic and responsible" and said it represents a balance between economic responsibility and encouraging a healthy economy.

"We will not put jobs and economic growth at risk by cutting too soon," he told reporters in the provincial legislature in Toronto.

The budget document said the government also planned to introduce changes to the laws governing Ontario's drug system, paving the way for lower prices of generic drugs, the first step in an expected revamp of the province's health care system.

As expected, colleges and universities got help to increase enrolment — in the form of $310 million for 20,000 new spaces. But the promised boost for health care fell short, with cash-strapped hospitals getting a mere 1.5 per cent increase in funding, a move that's bound to accelerate the closing of beds and staff layoffs in facilities across the province.

Debt-to-GDP to rise above 40 per cent

The province's total debt is projected to be $212.4 billion as of March 31. The extended run of deficits is expected to raise the ratio of provincial debt to GDP above 40 per cent, which could impact how outside lenders view the province, said Derek Burleton, a senior economist with TD Bank.

"You've got a net debt-to-GDP ratio that was only 25 per cent a few years ago … [that is] going to rise above 40 per cent in the next five years," he said. "It's a very significant increase in the debt burden.

"It will no doubt raise concerns about the potential for a downgrade in the province's credit rating."

The budget forecasts modest rises in interest rates and GDP growth of 2.7 per cent in 2010, 3.2 per cent in 2011 and 2012 and 3.0 per cent in 2013. A rise in interest rates above expectations could also impact how quickly the province is able to return to a balanced budget.

'Dalton McGuinty will never balance the books. He is hard-wired to spend.— Tim Hudak, Progressive Conservative leader

Progressive Conservative leader Tim Hudak said the Liberals' timetable for eliminating the deficit is unrealistic and will plunge the province deeper into debt.

"[Premier] Dalton McGuinty will never balance the books," said Hudak. "He is hard-wired to spend. I don't think he has it in him to get our spending under control."

"We needed a budget that demonstrated a real plan … Today, we did not see that plan."

Ontario Tory leader Tim Hudak called the province's plan to get out of deficit spending unrealistic on Thursday. (Pawel Dwulit/Canadian Press)

The government also fired a shot off the bow of organized labour by basing its economic projections on the assumption that there would be no new incremental wage increases in future collective-bargaining agreements, setting itself up for a battle in the next round of labour negotiations.

Hudak said the plan to freeze wages for public sector workers was a step in the right direction but that the government should immediately begin negotiations with unionized workers and not wait until job contracts expire.

Ontario NDP Leader Andrea Horwath said the budget would leave Ontarians "paying more and getting less."

She said the budget's threat of zero wage increases in future job contracts was vague in that it wasn't clear which public sector workers it was directed at.

But she said unionized workers are aware that times are tough.

"I'm quite sure that when they get to the bargaining table, they will do their part as well," she said.

Horwath also said the spending promises directed at Northern Ontario are too small to make a significant impact in the region and said the budget doesn't properly address the shift from child care to kindergarten that will come with the introduction of full-day kindergarten programs.

With files from Mike Hornbrook and The Canadian Press