Ontario can balance budget in 2017-18 after 9 straight deficits: fiscal watchdog
'There is little fiscal room to deal with unexpected events,' says Stephen LeClair
Kathleen Wynne's Liberal government is positioned to reach its target of balancing the budget in 2017-18, after nine straight deficits, according to a new report from Ontario's independent fiscal watchdog.
Stephen LeClair, Ontario's Financial Accountability Officer, projects a $580 million deficit for next year in his 2016 economic and fiscal outlook but argues that the government can easily work this down to zero.
"Given the flexibility built into the government's fiscal projections, the Province is in a position to achieve its commitment of balancing the budget in 2017-18," says the report.
But the report warns the province risks dipping back into the red after 2019, unless more is done to restrain spending or government revenues rise faster than projected.
"The FAO projects a gradual deterioration in the budget balance, with deficit of $1.7 billion by 2020-21," says the report.
Some risks, such as slower than expected economic growth, are mostly outside the government's control, the report said. Other risks include overly optimistic government policy assumptions or overly ambitious spending targets.
"There is little fiscal room to deal with unexpected events," he said.
The report estimates that Ontario's net debt is project to rise by nearly $54 billion to $350 billion over the next five years. This debt growth reflects projected deficits, including $45 billion in additional borrowing, mostly to finance new capital spending for the province's infrastructure program.
LeClair said he is concerned with the province's plan to achieve a debt-to-GDP ratio of 27 per cent.
"If the government wishes to maintain a debt-to-GDP target of 27 per cent, it should provide a plan and a realistic timeframe for the achievement of this goal."