Government's Fiscal Plan Faces Significant Risks
Toronto - Ontario's Financial Accountability Officer says that because of likely difficulties in limiting spending and optimistic assumptions for revenue growth, there is a significant risk that the Province will be unable to balance the budget by 2017-18.
Stephen LeClair today released "An Assessment of Ontario's Medium-Term Economic and Fiscal Outlook," an independent analysis of the state of the government's finances.
LeClair points out that there's been a significant slowdown in economic growth since the Minister of Finance tabled his 2015 Budget. "At the time of the 2015 Budget, private sector forecasters were projecting that nominal GDP - the broadest single measure of the tax base would grow by an average of 4.3%. Even with an economic rebound in the second half of 2015, we believe nominal GDP growth could be as low as 3.0% this year."
LeClair says "As a result of slower economic growth, I estimate that government revenue could be as much as $1 billion lower than planned in 2015-16."
The Financial Accountability Officer says this loss of revenue will aggravate the impact of another fiscal pressure, the need to restrain government expenditures.
"The government's 2015 Budget includes ambitious plans to limit increases in program spending to 0.5% for the next three years. The government's spending plans will not keep pace with population growth and inflation, and are roughly one-third the pace of spending growth over the past four years."
LeClair says his officials looked at a number of scenarios affecting the government's finances and budget plan.
"If the government maintains the average growth in program spending at 1.4%, as it has for the last four years, and revenue grows by 3.3%, which is less than the Budget projection, but stronger than the past four years, it can expect a budget deficit of $5.2 billion next year, and $3.5 billion in 2017-18.
The Financial Accountability Office provides independent analysis to the Legislative Assembly on the state of the province's finances, trends in the provincial economy and other important matters.