The Ontario Liberals are boasting that they will balance the province’s books a year earlier than their Progressive Conservative rivals, but that promise hinges on billions of dollars in funding from Ottawa and a host of other favourable assumptions.
The Liberal costing document released Monday forecasts a deficit of just $5-billion in fiscal 2025-26, matching the deficit estimate for that year in last month’s provincial budget from the PCs. The Liberals say they would balance the Ontario budget the following year, while the budget forecasts a surplus a year later, in fiscal 2028.
Without a windfall from the federal government and other rosy assumptions, however, the Liberals’ fiscal trajectory is significantly worse than the Tories’ projections and casts doubt on their claim that they could balance the budget within four years.
One of the biggest discrepancies is the Liberals’ inclusion of billions of dollars in additional corporate tax revenues, rising to an extra $4.5-billion by fiscal 2026. The province’s Office of the Auditor-General did this month say it believes such revenues were understated in the budget. The Financial Accountability Office (FAO), a legislative watchdog, issued in April a similar outlook with revenue numbers higher than those in the province’s budget.
The Liberals include that extra revenue on the assumption that both of those estimates are correct and that the province’s Finance Ministry lowballed its estimates for corporate tax income. (They chose to use the FAO projections, which landed in the middle of the range of revenues forecast by the Auditor-General.)
If the Finance Ministry was indeed overly conservative, those revenues would arrive in provincial coffers no matter which party was in power. So for the Liberals to include the revenue in their deficit forecast, but then not include them in their rivals’ numbers when making comparisons, makes no sense. If such revenues are included in both parties’ projections, the Tories would come close to balancing the provincial budget in fiscal 2026 – a year ahead of the Liberals.
Then there are the billions of dollars in hoped-for federal funding. The Liberals say they will renegotiate the recent child-care deal with Ottawa and gain $2-billion over four years, in part to fund a reduction in the cost of after-school care and to enhance parental leave. Any such agreement with Ontario, of course, would create the obvious political peril for the federal government of every other province also demanding additional funding.
When asked why Ottawa would agree to such a step, the Ontario Liberals said in a statement that they believe the federal government would “feel the same.” The Liberals would also draw down on contingency funds to pay for parental leave, even if Ottawa declined to provide more money.
The costing document also writes in $217-million for the current fiscal year from the Canada Mental Health Transfer (and another $1.1-billion for the following three years), even though that federal program has not yet been set up and there was no funding for it in last month’s federal budget. In its statement, the provincial Liberals simply said they believe their federal counterparts will keep their commitment of launching such a program in the current fiscal year.
In addition, the Liberals propose several programs for which they say the federal government will provide full funding, with no provincial contribution being made. University of Victoria economist Rob Gillezeau said it is unlikely that Ottawa would accept such an arrangement. In their statement, the provincial Liberals said they could further draw down contingency funds to pay for those programs, or scale them back, if federal funding did not materialize.
Mr. Gillezeau also questioned a projected $2.2-billion in savings over three years from “procurement efficiencies,” particularly with inflation surging.
“That’s not going to happen,” said the economist, who has worked in staff positions for both the British Columbia and federal NDP.
In their statement, the Liberals defended their assumption of efficiencies, adding that it amounts to saving 1 per cent of non-salary costs initially, rising to 3 per cent by fiscal 2026.
One of the largest issues with the Liberal cost projections is what’s not there – namely, a cost estimate for the 100,000 new health care professionals, including doctors and nurses, that the party’s platform promises. The platform does indicate that some of that hiring would be to replace retiring workers, but it also says that the Liberals would expand Ontario’s health care capacity – clearly a promise to spend more money.
Mr. Gillezeau said a conservative assumption would be that each of those hires would cost $120,000 a year, including salary and benefits. If all 100,000 positions were new hires, the total annual cost would hit $12-billion. Even if just one in 10 were new hires, those positions alone could result in an extra $1.2-billion in annual expenses, according to Mr. Gillezeau’s rough estimates.
In its statement, the Liberals said the cost of those 100,000 workers is embedded throughout its platform.
Similarly, the party’s costing document did not include an estimate for its promise to reimburse parents for making lower child care fees retroactive to Jan. 1. But in a separate e-mailed statement, the party said that the reimbursement would cost about $455-million and be backdated to fiscal 2022. Because of that backdating, the Liberals said, the expense did not appear in their costing document.
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Patrick Brethour