Ontario's “fiscal fitness” in ugly shape: Report
For more details
Restoring Canada’s Fiscal Fitness
Full report
While Canada may have weathered the recent economic downturn better than most, we did not escape without our fair share of scrapes and bruises. In the race to inject billions of taxpayer dollars to "stimulate" the economy, our governments sank further and further into debt.
Indexed government spending
Sources: CFIB, based on Department of Finance Fiscal Reference Tables, Statistics Canada, Cat. No. 13-018-XWE, Vol. 3,
Nowhere has the combination of poor public policy and swings in the business cycle done more damage than in Ontario. Since 2005-06, total provincial spending relative to GDP has leapt from 17 per cent to 21 per cent-four scant years. Even so, the budget balance, which was not really under control before the recession started, ballooned to more than $7 billion, or about 3 per cent of GDP. Here, keeping spending to the rate of the growth of the economy (something not accomplished in at least a decade) is considered 'out of control'; deficits would continue to widen and debt levels would ignominiously rival even Quebec. Even holding spending growth at CPI rates would not do the job.
The only path now open to the Ontario government will be to freeze spending in absolute terms, and hope the economy responds well enough to bring the budget into balance by the latter half of the decade. Net debt will still remain above 30 per cent of GDP even under this best case scenario by decade's end, which would still be 5 points above its level in 2007-08.
Ontario fiscal projections
Sources: Budget documents, fiscal updates and CFIB projections
While balanced budgets should be the goal of all governments, they can easily mask unsustainable spending patterns as documented in this report. Although no Canadian government has enshrined limits on government spending in legislation, evidence from south of the border with Tax and Expenditure Limitations is positive and something Ontario should consider adopting to help Queen's Park live within its means.
Ontario fiscal projections
Sources: Budget documents, fiscal updates and CFIB projections
