Ontario’s finance minister says the province’s $9.8 billion deficit is higher than he “would like” but is still promising to balance the books while keeping up with record infrastructure spending amid a projected economic slowdown.
In a post-budget speech and fireside chat with the Toronto Region Board of Trade, Peter Bethlenfalvy offered his rationalization about why he believes the deficit, laid out in the Ford government’s $214.5 billion budget, is manageable, especially given the construction-related spending outlined in it.
The record-setting budget has left fiscal conservative groups grumbling about whether taxpayers are receiving value for their money and are calling on the government to reign in spending at Queen’s Park.
Deficit discomfort
Days after delivering the budget, Bethlenfalvy addressed a business crowd at the board of trade and reflected on the concerns about the Ford government’s $9.8 billion deficit – a $10 billion decline from the $200 million surplus projected just one year earlier.
Bethlenfalvy blamed the deficit on the projected economic slowdown, high inflation, higher interest rates and one million net new residents in the province which has “put pressure” on Queen’s Park.
The 2024 fiscal plan shows tax revenues flowing into provincial coffers are expected to be blunted during this year.
“This has led to a higher deficit and higher than I would like,” Bethlenfalvy said. “I want to remind everybody it is temporary.”
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Bethlenfalvy, who describes himself as a “strong fiscal conservative,” defended the record spending, pointing to an oft-used metric to demonstrate that the provincial debt, which now stands at $414.8 billion, is under control.
“Our debt-to-GDP is under 40 (per cent) after a pandemic and after an environment of interest rates and inflation we haven’t seen in a couple of decades.”
Still, the Canadian Taxpayers Federation accused the Ford government of “runaway spending” and called for a top-to-bottom review of expenses.
“We’re spending $14 billion this year on debt interest, that’s money we’re throwing out the window,” said Jay Goldberg with the Canadian Taxpayers Federation. “That’s not going to hospitals. It’s not going education, not going to tax cuts.”
Goldberg added: “It really is high time that we get our finances in order and not wasting so much sending money to bondholders on Bay Street.”
Balancing the books
Since taking office in 2018, the Ford government has promised to balance the budget on two separate occasions but failed both times.
In 2019, then-finance minister Vic Fedeli projected a surplus in 2023-24 of $300 million but the government wound up posting a $3 billion deficit. Again in 2022, current Finance Minister Peter Bethlenfalvy promised to post a $200 million surplus and is now projecting a $9.8 billion surplus.
Budget balance, the government said, would come just before the next provincial election in 2026 when the province is projected to run a $500 million surplus.
Despite the government’s deficit record, Bethlenfalvy insisted the government is “committed” to balancing the budget.
“I’m very committed to being fiscally responsible,” Bethlenfalvy told the board of trade. “I think it’s fundamental for economic prosperity to have a path to balance. When you’re using taxpayers’ money for a host of reasons.”
Bethlenfalvy said the bulk of this year’s spending was on public infrastructure and that it would be a “mistake” to slow down the construction of the subway lines, hospital infrastructure and the controversial Highway 413 despite the economic slowdown.
“Economic cycles have their ups and downs,” Bethlenfalvy said. “The worst thing you can do in a downturn in the economic cycle is slow down your investment.”
“(The deficit) will pass, we have a path to balance, these long-term investments in real assets and infrastructure, they’re going to stay for generations,” Bethlenfalvy added. “It takes grit to keep grinding away.”
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